<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 1999
REGISTRATION NO. 333-72317
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
STATIA TERMINALS GROUP N.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NETHERLANDS ANTILLES 4226 52-2003016
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
TUMBLEDOWN DICK BAY
ST. EUSTATIUS, NETHERLANDS ANTILLES
(011) 5993-82300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 664-1666
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C> <C>
JACK R. PINE, ESQ. JOHN W. ERICKSON, ESQ. MICHAEL ROSENWASSER, ESQ.
STATIA TERMINALS, INC. WHITE & CASE LLP ANDREWS & KURTH L.L.P.
801 WARRENVILLE ROAD, SUITE 200 1155 AVENUE OF THE AMERICAS 805 THIRD AVENUE, 7TH FLOOR
LISLE, ILLINOIS 60532-1376 NEW YORK, NEW YORK 10036-2787 NEW YORK, NEW YORK 10022
(630) 435-9540 (212) 819-8200 (212) 850-2816
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the shares being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional shares for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED APRIL 20, 1999
7,600,000 SHARES
[LOGO]
STATIA TERMINALS GROUP N.V.
COMMON SHARES
------------------------
STATIA TERMINALS GROUP N.V. IS OFFERING 7,600,000 COMMON SHARES. THIS IS OUR
INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR COMMON
SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN
$19.50 AND $20.50 PER COMMON SHARE.
------------------------
THE COMMON SHARES HAVE BEEN CONDITIONALLY APPROVED FOR LISTING ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "STNV", SUBJECT TO OFFICIAL NOTICE OF ISSUANCE.
------------------------
INVESTING IN THE COMMON SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 8.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
-------------- -------------- ------------
<S> <C> <C> <C>
Per Common Share................... $ $ $
Total.............................. $ $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Statia Terminals Group N.V. has granted the underwriters the right to purchase
up to an additional 760,000 common shares to cover over-allotments.
------------------------
JOINT BOOKRUNNING MANAGERS
BEAR, STEARNS & CO. INC. MORGAN STANLEY DEAN WITTER
------------------------
PRUDENTIAL SECURITIES DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
, 1999
<PAGE>
[LOGO]
[GRAPHIC]
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, common shares only in jurisdictions where offers and sales are permitted.
The information contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of any
sale of the common shares.
Until , 1999 (25 days after the date of this prospectus), all
dealers that buy, sell or trade in our common shares, whether or not
participating in this offering, may be required to deliver a prospectus. This
delivery requirement is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
The underwriters expect the common shares will be ready for delivery in New
York, New York on or about , 1999.
<PAGE>
TABLE OF CONTENTS
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PAGE
------
<S> <C>
Prospectus Summary....................................................................................... 1
Statia Terminals Group N.V............................................................................. 1
Business Strategy...................................................................................... 2
The Offering........................................................................................... 3
Summary Historical and Pro Forma Combined Financial Data............................................... 5
Recent Developments.................................................................................... 6
Forward-Looking Statements............................................................................. 7
Risk Factors............................................................................................. 8
Risks Inherent in the Common Shares.................................................................... 8
Risks Inherent in Our Business......................................................................... 13
The Restructuring........................................................................................ 16
Use of Proceeds.......................................................................................... 17
Capitalization........................................................................................... 18
Dilution................................................................................................. 19
Cash Distribution Policy................................................................................. 20
Quarterly Distributions of Available Cash.............................................................. 20
Distributions from Operating Surplus During Subordination Period....................................... 20
Distributions from Operating Surplus After Subordination Period........................................ 21
Operating Surplus and Interim Capital Transactions..................................................... 21
Restrictions on Distributions of Available Cash........................................................ 22
Subordination Period; Conversion of Subordinated Shares................................................ 22
Deferral of Distributions on Subordinated Shares....................................................... 23
Incentive Distributions................................................................................ 24
Distributions from Interim Capital Transactions........................................................ 24
Adjustment of Target Quarterly Distribution and Additional Distribution Levels......................... 25
Distribution of Cash upon Liquidation.................................................................. 25
Restrictions on Distributions............................................................................ 27
Restrictions Imposed by Netherlands Antilles Law....................................................... 27
Restrictions Imposed by Indenture...................................................................... 27
Unaudited Pro Forma Consolidated Condensed Financial Statements.......................................... 29
Selected Consolidated Financial Data..................................................................... 33
Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 35
Overview of Operations................................................................................. 35
Results of Operations.................................................................................. 37
Year Ended December 31, 1998 Compared with Year Ended December 31, 1997................................ 38
Year Ended December 31, 1997 Compared with Year Ended December 31, 1996................................ 39
Selected Quarterly Financial Information............................................................... 40
Liquidity and Capital Resources--Subsequent to the Castle Harlan Acquisition........................... 41
Liquidity and Capital Resources--Prior to the Castle Harlan Acquisition................................ 42
Capital Expenditures................................................................................... 42
Environmental, Health and Safety Matters............................................................... 43
Information Technology and the Year 2000............................................................... 45
Political, Inflation, Currency and Interest Rate Risks................................................. 46
Tax Matters............................................................................................ 46
Legal Proceedings...................................................................................... 46
Insurance.............................................................................................. 47
Accounting Standards and Policies...................................................................... 47
Other Matters.......................................................................................... 47
Quantitative and Qualitative Disclosures About Market Risk............................................. 48
Industry................................................................................................. 49
Terminaling............................................................................................ 49
Bulk Cargo Movement.................................................................................... 50
Blending............................................................................................... 51
Processing............................................................................................. 51
Seasonal and Opportunity Storage....................................................................... 51
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Bunker Sales........................................................................................... 52
Business................................................................................................. 54
Introduction and History............................................................................... 54
Competitive Strengths.................................................................................. 55
Business Strategy...................................................................................... 56
Services and Products.................................................................................. 57
Pricing................................................................................................ 58
Information by Location................................................................................ 59
Competition............................................................................................ 62
Customers.............................................................................................. 63
Suppliers.............................................................................................. 64
Environmental, Health and Safety Matters............................................................... 64
Employees.............................................................................................. 65
Legal Proceedings...................................................................................... 66
Insurance.............................................................................................. 66
Management............................................................................................... 67
Directors and Executive Officers....................................................................... 67
Executive Compensation................................................................................. 70
Old Stock Option Plan.................................................................................. 73
New Share Option Plan.................................................................................. 73
Stockholder Loans...................................................................................... 73
Employment Agreements.................................................................................. 74
Special Management Bonus............................................................................... 74
Security Ownership....................................................................................... 75
Certain Relationships and Related Transactions........................................................... 76
Sale of Brownsville Terminal........................................................................... 76
Management Agreement................................................................................... 76
Consulting Agreement................................................................................... 76
Stockholders' Agreements............................................................................... 76
Loans to Management.................................................................................... 76
Board of Directors..................................................................................... 77
Description of Common Shares............................................................................. 78
General................................................................................................ 78
Distributions and Distributions Upon Liquidation....................................................... 78
Voting Rights.......................................................................................... 78
Issuance of Additional Shares.......................................................................... 79
Transfer Agent and Registrar........................................................................... 79
Restrictions on Ownership and Transfer................................................................. 79
Description of the Subordinated Shares................................................................... 82
Conversion of Subordinated Shares...................................................................... 82
Distributions upon Liquidation......................................................................... 82
Shares Eligible for Future Sale.......................................................................... 83
Taxation................................................................................................. 84
Netherlands Antilles Taxation.......................................................................... 84
U.S. Federal Income Taxation........................................................................... 84
Plan of Distribution..................................................................................... 88
Experts.................................................................................................. 90
Legal Matters............................................................................................ 90
Enforceability of Certain Civil Liabilities.............................................................. 90
Available Information.................................................................................... 90
Glossary of Offering Terms............................................................................... A-1
Pro Forma Available Cash from Operating Surplus.......................................................... B-1
Index to Financial Statements............................................................................ F-1
</TABLE>
ii
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information that you should consider
before investing in the common shares. You should read the entire prospectus
carefully, including the financial statements and the notes to those statements.
The following should help you understand some of the conventions and
defined terms used throughout this prospectus:
o Frequently in this prospectus, we refer to ourselves, Statia Terminals
Group N.V., as "we" or "us." Generally we refer to ourselves as "we" or
"us" when discussing our operations. As the context requires, references
to "we" and "us" include all of our subsidiaries, including Statia
Terminals International N.V.
o For ease of reference, a glossary of terms used in this prospectus and
useful in understanding the common shares we are offering in this
prospectus is included as Appendix A to this prospectus.
o Unless we state otherwise, the information in this prospectus assumes
that the underwriters' over-allotment option is not exercised.
o Unless we state otherwise, all references in this prospectus to "$" or
"dollars" are to United States dollars.
STATIA TERMINALS GROUP N.V.
We believe we are one of the five largest independent marine terminaling
companies in the world as measured in terms of storage capacity. We believe we
are the largest independent marine terminal operator handling crude oil imported
into the Eastern U.S. Our two terminals are strategically located at points of
minimal deviation from major shipping routes. We provide services to many of the
world's largest producers of crude oil, integrated oil companies, oil traders,
refiners, petrochemical companies and ship owners. These customers include Saudi
Aramco and Tosco. Our customers transfer their products to our facilities for
subsequent transfer to vessels destined for the Americas and Europe in a process
known as "transshipment."
We own and operate a facility on the island of St. Eustatius, Netherlands
Antilles, and a facility at Point Tupper, Nova Scotia, Canada. At Point Tupper,
we operate the deepest independent ice-free marine terminal on the North
American Atlantic coast. Both of our facilities can accommodate substantially
all of the world's largest fully-laden very-large and ultra-large crude
carriers. Our facilities are qualified to allow us and our customers to
transship products to other destinations with minimal Netherlands Antilles or
Canadian tax effects. In addition to storage, we also provide related services,
including supplying fuel to marine vessels for their own engines in a process
known as "bunkering," crude oil and petroleum product blending and processing,
and emergency and spill response.
We have built or renovated 80% of our tank capacity and related facilities
over the last eight years. Since 1990, we have tripled our storage capacity at
St. Eustatius and added an offshore single point mooring buoy with loading and
unloading capabilities. During the period from 1992 through 1994, we converted
and renovated a former refinery site into an independent storage terminal at
Point Tupper. At the end of 1998, our tank capacity was 18.7 million barrels.
Our earnings before interest expense, income taxes, depreciation and
amortization have increased from $20.3 million in 1996 to $30.1 million in 1998.
During 1996, 1997 and 1998, our cash flows from operations were $11.3 million,
$9.8 million and $18.2 million, respectively. During these same years we
experienced net losses of $3.2 million, $8.4 million and $1.5 million,
respectively. However, on a pro forma basis for 1998 our earnings before
interest expense, income taxes, depreciation and amortization and our net income
were $32.9 million and $9.7 million, respectively. Earnings before interest
expense, income taxes, depreciation and amortization is presented to provide
additional information related to our ability to service debts and is not an
alternative measure of operating results or cash flow from operations.
1
<PAGE>
The marine petroleum terminaling industry is primarily engaged in bulk
storage and transshipment of crude oil and petroleum products. Demand for our
terminaling services depends on the amount of crude oil and petroleum products
imported into the U.S. The U.S. Department of Energy projects that the import
requirements of crude oil and refined petroleum products into the U.S. will
increase at an annual compounded rate of 4.3% from 1998 through 2003.
Due to significant economies of scale, crude oil is shipped from the Middle
East, North Sea and West Africa in very-large and ultra-large crude carriers.
These vessels, however, are too large to deliver their cargo directly to many
ports, including virtually all U.S. ports. Therefore, most petroleum companies
shipping by these vessels transfer their liquid cargo to smaller vessels,
usually while at sea, a process known as "lightering," or transship their cargo
through a terminal to other smaller vessels. While the direct costs of
transshipment service provided by terminals is typically more expensive than
lightering, terminals offer several advantages over lightering, such as:
o reduced risk of environmental damage,
o less dependence on weather conditions,
o increased scheduling certainty,
o ability to access value-added terminal services, and
o ability to store products close to the market.
Since November 1996, Castle Harlan Partners II L.P. and some of its
affiliates have owned the majority of our outstanding voting shares.
Our principal executive offices are located at Tumbledown Dick Bay, St.
Eustatius, Netherlands Antilles, and our telephone number is (011) 5993-82300.
BUSINESS STRATEGY
Our business strategy is to manage our operations so we can generate stable
cash flow and make the target quarterly distribution on all of the common and
subordinated shares and to increase our asset values. We intend to pursue this
strategy by:
o Developing Strategic Relationships. To maximize recurring revenues
generated by charges for storage and based on the flow, or throughput, of
product, we generally target customers who have a continuing need to store crude
oil and petroleum products to supply a specific demand, such as a refinery or
other downstream distribution to consumers.
o Generating Stable Cash Flow Through Long Term Contracts. We have
generally entered into long term storage contracts with the customers with whom
we have established strategic relationships. These contracts generally have
terms of one to five years plus, in most cases, renewal options.
o Emphasizing Customer Confidentiality. In contrast to many of our
competitors, we do not compete with our customers in the business of trading
crude oil and petroleum products. We believe that, in general, our customers
prefer to do business with providers of services who are not competitors in
order to maintain the confidentiality of important business data.
o Capitalizing on a Wide Range of Value-Added Services. We seek to further
differentiate ourselves from our competitors and to increase revenues through
our comprehensive range of terminaling-related services which include:
o bunkering,
o crude oil and petroleum product blending and processing,
o bulk product sales, and
o various ship services.
o Developing Opportunities at our Point Tupper Facility. We are seeking to
attract additional business from customers in the North Sea and from the
emerging production areas located in Eastern Canada. Due to this initiative, we
plan to build new storage facilities at Point Tupper as the demand increases.
o Expanding Our Bunkering Operations. We seek to expand our business in
Eastern Canada by capitalizing on our reputation for consistently maintaining a
supply of quality marine fuels and lubricants for delivery to bunkering
customers.
o Strategic Acquisitions. From time to time we will consider opportunities
to acquire other marine terminals and related businesses.
Industry conditions and competition may make it difficult for us to
implement our business strategy. Even if industry conditions and competition
permit us to pursue expansion at our Point Tupper facility or of our bunkering
operations, those improvements could require substantial additional financing
that may not be available on acceptable terms or at all.
2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities that we are offering you....... 7,600,000 common shares
Shares to be outstanding after this
offering................................ 7,600,000 common shares and 3,800,000 subordinated shares. In
addition, 38,000 incentive rights will be outstanding.
Distributions of available cash........... o Common shares are entitled, to the extent there is sufficient
available cash, to a target quarterly distribution of $0.45 per
share, or $1.80 per share on a yearly basis, before we make any
distributions on subordinated shares.
o "Available cash" for any quarter will consist generally of all cash
on hand at the end of that quarter, as adjusted for reserves. We
have discretion in establishing reserves. Further, Netherlands
Antilles law as well as our debt instruments may limit the amount
of available cash.
o In general we will make distributions of available cash, if any, in
the following priorities:
First, to the common shares until each has received $0.45 per
quarter plus any arrearages from prior quarters.
Second, to the subordinated shares until each has received $0.45
per quarter. Subordinated shares do not accrue distribution
arrearages.
o We will adjust the target quarterly distribution for the period
from the closing of this offering through June 30, 1999 based on
the actual length of that period.
o We cannot assure you that we will be able to pay the target
quarterly distribution. The historical and pro forma cash generated
during 1998 would not have been sufficient to pay the target
quarterly distribution during each quarter of 1998 on the number of
common and subordinated shares that will be outstanding following
this offering. On a pro forma basis, available cash generated in
1998 would have resulted in an aggregate distribution to the common
shares of approximately $12.2 million, or $1.60 per common share,
for all four quarters and no distributions on the subordinated
shares. See Appendix B "Pro Forma Available Cash From Operating
Surplus" for the calculation of pro forma available cash from
operating surplus.
Deferral of distributions on subordinated
shares.................................. We will defer making the first $6.8 million of distributions that
would have otherwise been made on the subordinated shares until we
meet financial tests. This $6.8 million amount is equal to one year
of target quarterly distributions on the subordinated shares.
Timing of distributions................... In general, we will distribute available cash, if any, approximately
45 days after each March 31, June 30, September 30 and December 31 to
the holders of common and subordinated shares and incentive rights on
the applicable record date.
Incentive distributions................... If we make quarterly distributions of available cash to the common
and subordinated shares above specified additional distribution
levels, the holders of incentive rights will receive
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
distributions that represent an increasing percentage of the total
distributions we distribute above those specified distribution
levels.
Subordination period...................... o The subordination period will generally end once we meet financial
tests, but it cannot end prior to June 30, 2004. Generally, these
tests will be satisfied when we have earned and made the target
quarterly distribution on all shares for each of the three
preceding consecutive non-overlapping four-quarter periods.
o When the subordination period ends, all subordinated shares will
convert into common shares on a one-for-one basis and will then
participate equally with the other common shares, subject to the
distribution rights of incentive rights, in future distributions of
available cash. The common shares will then no longer accrue
distribution arrearages.
Early conversion of subordinated
shares.................................. o If we satisfy the tests for ending the subordination period for any
quarter ending on or after June 30, 2002, one-quarter of the
subordinated shares will convert into common shares.
o If we satisfy these tests for any quarter ending on or after
June 30, 2003, an additional one-quarter of the subordinated shares
will convert into common shares. The early conversion of this
second one-quarter of the subordinated shares may not occur until
at least one year following the early conversion of the first
one-quarter of the subordinated shares.
Restrictions on ownership
and transfer............................ The articles of Statia Terminals Group provide that any sale or other
disposition of common shares that would result in any person or group
owning or being considered to own more than 9.9% of the combined
voting power of all of our classes of voting stock will be either
null and void or prohibited to the extent that the sale or
disposition causes ownership in excess of that 9.9% limit. These
restrictions do not apply to the conversion of subordinated shares
into common shares, any subsequent transfer of the common shares
resulting from such conversion or the acquisition of any common
shares pursuant to the exercise of compensatory stock options or to
any of our employee benefit plans or any subsequent transfer of those
shares.
Use of proceeds........................... We estimate that the net proceeds we will receive from the sale of
common shares offered through this prospectus will be approximately
$142.1 million, after deducting underwriting discounts and
commissions, but before deducting fees and expenses incurred in
connection with this offering. We anticipate using the net proceeds
of this offering and other cash on hand to:
o redeem all our Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock; and
o purchase additional capital stock of Statia Terminals
International, which will use the proceeds to redeem or acquire 25%
of its mortgage notes.
</TABLE>
4
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth summary financial data for the periods and
as of the dates indicated. In January 1996, our former parent, CBI Industries,
Inc., was acquired by Praxair, Inc. The statement of operations data for each
of:
o the period from January 1, 1996 through November 27, 1996,
o the period from November 27, 1996 through December 31, 1996, and
o the years ended December 31, 1997 and 1998
have been derived from, and are qualified by reference to, our audited
consolidated financial statements included elsewhere in this prospectus. The
summary unaudited pro forma financial information is presented for illustrative
purposes only to illustrate the effects of:
o the disposition of Statia Terminals Southwest, Inc.,
o this offering, and
o the restructuring.
The summary unaudited pro forma financial information is not necessarily
indicative of future operating results or financial position. The summary
historical consolidated financial data set forth below should be read in
conjunction with, and is qualified by reference to, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Unaudited Pro
Forma Consolidated Condensed Financial Statements" and our consolidated
financial statements and accompanying notes thereto and other financial
information included elsewhere in this prospectus. Our historical capital
structure is not comparable to the pro forma capital structure. Pro forma net
cash flow information is not required in this prospectus. Therefore, historical
earnings per share data and pro forma cash flow information are considered not
applicable and are not presented. For an explanation of "not meaningful,"
EBITDA, and a description of the consolidated fixed charge coverage ratio, see
"Selected Consolidated Financial Data."
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
PRE-CASTLE HARLAN
ACQUISITION
------------------ POST-CASTLE HARLAN ACQUISITION
--------------------------------------------------------------------
JANUARY 1, 1996 YEAR ENDED DECEMBER 31,
THROUGH NOVEMBER 27, 1996 -------------------------------------------------
NOVEMBER 27, THROUGH PRO FORMA
1996 DECEMBER 31, 1996 1997 1998 1998
------------------ ----------------- ----------------------- ----------- -----------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Revenues......................... $ 140,998 $ 14,956 $ 142,499 $ 136,762 $ 135,149
Cost of services and products
sold........................... 129,915 12,803 122,939 106,688 105,014
Gross profit..................... 11,083 2,153 19,560 30,074 30,135
Administrative expenses.......... 8,282 664 7,735 9,500 8,150
Operating income................. 2,801 1,489 11,825 20,574 21,985
Loss (gain) on disposition of
property and equipment......... (68) -- (109) 1,652 --
Interest expense................. 4,187 1,613 16,874 16,851 12,651
Provision for income taxes....... 629 132 780 320 320
Net income (loss) available to
holders of common equity....... (2,682) (522) (8,361) (1,503) 9,698
Pro forma diluted earnings per
common and subordinated share
and incentive rights........... N/A N/A N/A N/A 0.85
Weighted average shares
outstanding in computing pro
forma diluted earnings per
share.......................... N/A N/A N/A N/A 11,438,000
BALANCE SHEET DATA:
Total assets..................... N/M 260,797 246,479 245,610 238,812
Long-term debt................... N/M 135,000 135,000 135,000 101,250
Redeemable Preferred Stock Series
A through C.................... N/M 40,000 40,000 40,000 --
Preferred Stock Series D and E... N/M 61,000 61,000 54,824 --
Total stockholders' equity....... N/M 58,982 50,621 43,331 118,230
NET CASH FLOW FROM (USED BY):
Operating activities............. 9,108 2,235 9,770 18,190 N/A
Investing activities............. (102,890) (178,033) (12,935) (4,092) N/A
Financial activities............. 92,998 185,076 -- (6,150) N/A
OPERATING DATA:
EBITDA........................... 17,882 2,452 22,489 30,116 32,882
Consolidated fixed charge
coverage ratio................. -- 1.7x 1.5x 2.0x 2.7x
Maintenance capital
expenditures................... 12,887 1,203 4,401 9,000 8,906
Capacity (in thousands of
barrels)....................... 20,387 20,387 20,387 19,556 N/A
Percentage capacity leased....... 68% 74% 70% 91% N/A
Throughput (in thousands of
barrels)....................... 81,994 13,223 118,275 119,502 N/A
Vessel calls..................... 922 108 1,030 1,027 N/A
N/A - not applicable
N/M - not meaningful
</TABLE>
5
<PAGE>
RECENT DEVELOPMENTS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999
As shown in the following table, based on the results of operations for
January and February 1999 and the preliminary results of operations for March
1999, we anticipate revenues of $37.4 million; operating income of
$4.3 million; a net loss of $1.7 million; earnings before interest expense,
income taxes, depreciation and amortization of $7.3 million; and cash flow from
operations of $9.0 million for the three months ended March 31, 1999. On a
preliminary basis, we expect operating income for the first quarter of 1999 to
be 44% above operating income of $3.0 million earned for the first quarter of
1998. We expect our net loss for the first quarter of 1999 to be 26% less than
our $2.2 million net loss for the first quarter of 1998. We expect earnings
before interest expense, income taxes, depreciation and amortization for the
first quarter of 1999 to be 25% above earnings before interest expense, income
taxes, depreciation and amortization of $5.8 million earned for the first
quarter of 1998. These increases are due primarily to higher terminaling
services revenue resulting in part from additional long term storage and
throughput contracts, and additional bunker and bulk product sales, due in part
to higher volumes of bunker fuel delivered. Earnings before interest expense,
income taxes, depreciation and amortization is presented to provide additional
information related to our ability to service debts and is not an alternative
measure of operating results or cash flow from operations.
The quarterly results for the three months ended March 31, 1999 are
preliminary, have not been reviewed by our independent certified public
accountants, and are subject to change. These quarterly results are not
necessarily indicative of future results of operations. This information should
be read in conjunction with our consolidated financial statements and notes
thereto included elsewhere in this prospectus. This information was prepared by
us on a basis consistent with our audited financial statements and our unaudited
pro forma consolidated condensed financial statements. This information includes
all adjustments, consisting of normal and recurring adjustments, that we
consider necessary for a fair presentation of the data. The pro forma results
presented below were prepared to illustrate the estimated effects of the pro
forma transactions discussed in the "Unaudited Pro Forma Consolidated Condensed
Financial Statements" as if these transactions had occurred as of the beginning
of each of the periods presented.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
(UNAUDITED)
----------------------------------------------------------------
QUARTER ENDED QUARTER ENDED
MARCH 31, 1998 DECEMBER 31, 1998
----------------------- -----------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
<S> <C> <C> <C> <C>
Total revenues............................................ $ 30,364 $29,627 $ 37,227 $37,227
Operating income.......................................... 2,999 3,459 6,709 7,047
Net income (loss)......................................... (2,233) 52 3,821 4,064
Cash flow from operations................................. 6,627 N/A (344) N/A
EBITDA.................................................... 5,804 6,116 11,857 9,846
<CAPTION>
PRELIMINARY
QUARTER ENDED
MARCH 31, 1999
------------------------------
HISTORICAL PRO FORMA
<S> <C> <C>
Total revenues............................................ $ 37,415 $37,415
Operating income.......................................... 4,333 4,671
Net income (loss)......................................... (1,655) 1,452
Cash flow from operations................................. 8,972 N/A
EBITDA.................................................... 7,252 7,590
</TABLE>
- ------------------
N/A - Not applicable
On a preliminary basis, we expect operating income for the first quarter of
1999 to be 35% below operating income earned for the fourth quarter of 1998 of
$6.7 million and our net loss for the first quarter of 1999 to be 143% below our
net income for the fourth quarter of 1998 of $3.8 million. Preliminarily,
earnings before interest expense, income taxes, depreciation and amortization
for the first quarter of 1999 will be 24% below earnings before interest
expense, income taxes, depreciation and amortization of $9.5 million earned for
the fourth quarter of 1998 excluding the non-cash reversal to the second quarter
valuation adjustment of $2.3 million. Included in our preliminary operating
income, net loss and earnings before interest expense, income taxes,
depreciation and amortization for first quarter of 1999 is a one-time charge in
the amount of approximately $1.9 million related to a management bonus accrued
during the first quarter of 1999. This bonus is intended to partially reimburse
management for certain adverse tax consequences that will result from this
offering and other past compensation arrangements. See "Management--Special
Management Bonus" for further discussion of this matter.
6
<PAGE>
Had we not incurred the management bonus of $1.9 million, operating income,
net income and earnings before interest expense, income taxes, depreciation and
amortization for the first quarter of 1999 on a preliminary basis would have
been approximately $6.3 million, $0.3 million and $9.2 million, respectively.
These amounts are approximately 6%, 80% and 3% less than the results achieved
for the fourth quarter of 1998, respectively, exclusive of the non-cash reversal
of the second quarter valuation adjustment. These decreases are primarily due to
lower terminaling services revenue resulting from fewer vessel calls during the
first quarter of 1999.
Excluding the management bonus of $1.9 million, pro forma operating income,
pro forma net income and pro forma earnings before interest expense, income
taxes, depreciation and amortization for the first quarter of 1999 on a
preliminary basis would have been $6.6 million, $3.4 million and $9.5 million,
down approximately 6%, 16% and 3% from the fourth quarter 1998 pro forma
results, respectively.
CONTRACT EXTENSIONS
One of our customers using our Point Tupper facilities, Tosco Corporation,
recently exercised its option to extend its storage and throughput agreement
with us into 2004. For further information regarding the Tosco contract, please
see "Business--Customers." In addition, a bunker supply contract with a major
state-owned oil producer was renewed until February 2000. For further
information regarding this supply contract, please see "Business--Suppliers."
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus includes forward-looking
statements. The statements about our plans, strategies, and prospects under the
headings "Prospectus Summary," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" are
forward-looking statements. Additional forward-looking statements can be
identified by the use of forward-looking terminology such as "may," "will,"
"believe," "anticipate," "expect" and "estimate."
All forward-looking statements involve risks and uncertainties. Although we
believe that our plans, intentions and expectations reflected in or suggested by
forward-looking statements are reasonable, we may not achieve them. Important
factors that could cause actual results to differ materially from our
forward-looking statements are included in "Risk Factors" and elsewhere in this
prospectus. These factors include, but are not limited to, fluctuations in the
supply of and demand for crude oil and other petroleum products, changes in the
petroleum terminaling industry, added costs due to changes in government
regulations affecting the petroleum industry, the loss of a major customer, the
financial condition of our customers, interruption of our operations caused by
adverse weather conditions, the condition of the U.S. economy, risks associated
with our efforts to comply with year 2000 requirements, and other factors
included in this prospectus.
7
<PAGE>
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to invest in common shares. The risks and
uncertainties described below are not the only ones facing us. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial
may also impair our business operations.
If any of the following risks actually occur, our business, financial
condition, results of operations or ability to make the target quarterly
distribution could be materially adversely affected. In such case the trading
prices of the common shares could decline, and you may lose all or part of your
investment.
RISKS INHERENT IN THE COMMON SHARES
THE ACTUAL AMOUNTS OF CASH DISTRIBUTIONS TO YOU WILL DEPEND ON FACTORS WHICH
MAY BE BEYOND OUR CONTROL.
Although we will make distributions equal to all of our available cash, we
can give no assurances regarding the amounts of available cash, if any, that we
will generate. Therefore, we cannot guarantee that we will make the target
quarterly distribution. The actual amounts of cash distributions may fluctuate
and will depend upon numerous factors relating to our business which may be
beyond our control, including:
o cash flow generated by operations,
o required principal and interest payments on our debt,
o restrictions contained in our debt instruments,
o issuances of debt and equity securities by us,
o fluctuations in working capital,
o capital expenditures,
o adjustments in reserves, including the expenditure of unfunded previously
reserved amounts,
o prevailing economic conditions, and
o financial, business and other factors.
OUR ABILITY TO MAKE CASH DISTRIBUTIONS TO YOU IS DEPENDENT NOT ONLY ON OUR
PROFITABILITY, BUT ALSO ON OUR OPERATING CASH FLOW, DRAWS FROM OUR CASH ON
HAND AND WORKING CAPITAL BORROWINGS.
Cash distributions are dependent primarily on our operating cash flow,
draws from our cash on hand and working capital borrowings, and not solely on
our profitability, which is affected by non-cash items. Therefore, cash
distributions might be made during periods when we record losses and might not
be made during periods when we record profits. The articles of Statia Terminals
Group give it discretion in establishing reserves for the proper conduct of our
business, and the exercise of that discretion will affect the amount of
available cash.
WE MAY NOT HAVE ENOUGH AVAILABLE CASH TO MAKE THE TARGET QUARTERLY
DISTRIBUTION TO YOU.
We will need approximately $13.7 million and $6.8 million of available cash
from our operating surplus to make the target quarterly distributions of $1.80
per share on an annual basis on the common and subordinated shares,
respectively, to be outstanding immediately after this offering. The amount of
pro forma available cash from our operating surplus generated during the year
ended December 31, 1998 was approximately $12.2 million or $1.60 per common
share on an annual basis. This amount would not have been sufficient to allow us
to make the full target quarterly distributions for that year on the common
shares and would not have been sufficient to allow us to make any distribution
on the subordinated shares. For the calculation of pro forma available cash for
the year ended December 31, 1998 from our operating surplus had the
restructuring to be consummated at the closing of this offering been completed
on January 1, 1998, see Appendix B. Based on preliminary results for the first
quarter of 1999 and assuming that the offering had closed on January 1, 1999,
the amount of pro forma available cash from our operating surplus generated
during this quarter would have been sufficient to allow us to make the full
target quarterly distribution on the common shares but would not have been
sufficient to allow us to make the full target quarterly distribution on the
subordinated shares.
Because our terminaling activities are cyclical, it is likely that we will
make additions to reserves during some quarters in order to fund operating
expenses, capital expenditures, interest and principal payments, and cash
distributions to holders of common and subordinated shares in future quarters.
The effect of the establishment of such reserves
8
<PAGE>
will be to increase the likelihood that we will make the target quarterly
distribution in any given quarter but to decrease the likelihood that we will
distribute any amount in excess of the target quarterly distribution in that
quarter. As a result of these and other factors, we can give no assurances
regarding the actual levels of cash distributions we will make to holders of
common and subordinated shares.
THE INDENTURE MAY LIMIT THE AMOUNT OF DISTRIBUTIONS WE CAN MAKE TO YOU.
Statia Terminals Group depends entirely on dividends from Statia Terminals
International to make distributions to you. Statia Terminals International's
ability to pay dividends is restricted by the indenture relating to its mortgage
notes which generally requires, among other things, that it pay dividends:
o only out of a pool equal to (a) 50% of its accrued consolidated net
income (less 100% of accrued consolidated net loss) since November 27,
1996 plus (b) the net cash proceeds of any sale of its capital stock; and
o only when its consolidated fixed charge coverage ratio is at least 2
to 1.
We will redeem or acquire 25% of the mortgage notes, and 35% of the
mortgage notes if the underwriters exercise their over-allotment option in full,
with the proceeds of this offering. We currently intend to redeem the remainder
of the mortgage notes on or around November 15, 2000. However, this redemption
probably will require refinancing since we expect that we will not be able to
redeem the mortgage notes at November 15, 2000 or even at maturity on
November 15, 2003 out of our projected operating cash flow. We can give no
assurances that we will be able to refinance this indebtedness on terms
acceptable to us, if at all. The terms of the debt incurred in connection with
any refinancing may also include terms that could limit our ability to make
distributions.
Although we can give no assurances, we believe that, at least through
November 15, 2000, the indenture restrictions will permit Statia Terminals
International to pay sufficient dividends to Statia Terminals Group to cover at
least the target quarterly distribution that we would be required to make on the
common and subordinated shares out of available cash from operating surplus. For
a discussion of the indenture restrictions, see "Restrictions on
Distributions--Restrictions Imposed by Indenture."
SINCE A SUBSTANTIAL PORTION OF OUR CASH FLOW MUST BE DEDICATED TO DEBT
SERVICE, OUR LEVEL OF INDEBTEDNESS MAY LIMIT THE AMOUNT OF DISTRIBUTIONS WE
CAN MAKE TO YOU.
As of December 31, 1998, our total long-term indebtedness on a pro forma
basis, assuming that the restructuring and the issuance of the common and
subordinated shares had already occurred, was $101.3 million. Subject to the
restrictions in Statia Terminals International's indenture relating to the
mortgage notes and our $17.5 million revolving credit facility, we may incur
additional indebtedness from time to time to provide working capital, to finance
acquisitions or capital expenditures or for other corporate purposes.
Our level of indebtedness could have important consequences to holders of
the common shares, because of the following:
o $11.9 million per year of our cash flow from operations must be dedicated
to debt service and will not be available for other purposes;
o our ability to obtain additional debt financing in the future for working
capital, capital expenditures or acquisitions may be limited; and
o our level of indebtedness could limit our flexibility in reacting to
changes in the industry and economic conditions generally.
Our ability to make distributions on the common shares and our ability to
satisfy our other debt obligations will depend upon our future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, most of which are beyond our control. If
we have an unexpected downturn in our operations, we could be forced to adopt an
alternative strategy that may include reducing or eliminating distributions,
reducing or delaying capital expenditures, selling assets, restructuring or
refinancing our indebtedness or seeking additional equity capital. We can give
no assurances that we could effect any of these strategies on satisfactory
terms, if at all.
NETHERLANDS ANTILLES LAW MAY LIMIT THE AMOUNT OF DISTRIBUTIONS WE CAN MAKE
TO YOU.
We must comply with Netherlands Antilles laws that govern when we may make
distributions to the holders of common and subordinated shares and incentive
rights. Generally, we may not make distributions to you unless our stockholders'
equity
9
<PAGE>
is greater than the par value of our outstanding capital. At the closing of this
offering, the par value of our outstanding capital will be approximately $0.1
million. For a discussion of restrictions imposed by Netherlands Antilles law,
see "Restrictions on Distributions--Restrictions Imposed by Netherlands Antilles
Law."
ASSUMPTIONS CONCERNING OUR FUTURE OPERATIONS MAY NOT BE REALIZED AND,
THEREFORE, YOU MAY NOT RECEIVE DISTRIBUTIONS IF AVAILABLE CASH IS LESS THAN
CURRENTLY EXPECTED.
We have relied on assumptions concerning our future operations in
establishing the terms of this offering, including the number and initial public
offering price of the common shares, the amount of subordinated shares and
incentive rights to be received by the current holders of Statia Terminals
Group's equity securities and the target quarterly distribution. For these
purposes we have assumed that:
o the demand for terminaling services, crude oil and petroleum products,
and sales of bunker and other bulk products will not materially decline
from current levels;
o no material accidents or other force majeure events will occur that
disrupt our terminaling facilities; and
o market, regulatory and overall economic conditions will not change
substantially.
Whether our assumptions are realized, in many cases, is not within our
control and cannot be predicted with any degree of certainty. In the event that
our assumptions are not realized, the actual amount of available cash from
operating surplus that we generate could be substantially less than that
currently expected and may be less in any quarter than that required to make the
target quarterly distribution.
OUR ABILITY TO ISSUE ADDITIONAL COMMON SHARES DURING THE SUBORDINATION
PERIOD MAY DILUTE THE INTERESTS OF YOUR COMMON SHARES.
Based on the circumstances of each case, the issuance of additional common
shares or securities ranking senior to the common shares may:
o dilute the value of the interests of the then-existing holders of common
shares in our net assets;
o dilute the interests of holders of common shares in distributions by us;
and
o modify the preference of holders of common shares upon dissolution and
liquidation of Statia Terminals Group.
During the subordination period, we are authorized, in our discretion, to
issue up to 4,000,000 additional common shares. In addition, we are authorized
to issue common shares upon the exercise of the underwriters' over-allotment
option, upon conversion of subordinated shares, pursuant to employee benefit
plans, upon combination or subdivision of common shares or in connection with
certain combinations and capital improvements. After the end of the
subordination period, we may issue the authorized but unissued common shares,
without the approval of the holders of the common shares.
ISSUANCE OF ADDITIONAL COMMON SHARES MAY REDUCE OUR ABILITY TO MAKE THE
TARGET QUARTERLY DISTRIBUTION ON YOUR SHARES.
Our ability to make the full target quarterly distribution on all the
common shares may be reduced by any increase in the number of outstanding common
shares. We will have more common shares outstanding as a result of future
issuances of common shares or as a result of the conversion of subordinated
shares pursuant to the termination of the subordination period or pursuant to
the provisions permitting early conversion. By making a distribution of
available cash from interim capital transactions, we may accelerate conversion.
Any of these actions will increase the percentage of the aggregate target
quarterly distribution made to the holders of common shares and decrease the
percentage of the aggregate target quarterly distributions made to the holders
of subordinated shares. As a result we may:
o reduce the amount of support provided by the subordination feature of the
subordinated shares; and
o increase the risk that we will be unable to make the target quarterly
distribution in full on all the common shares.
10
<PAGE>
SINCE SOME OF OUR DIRECTORS MAY HOLD SUBORDINATED SHARES AND/OR INCENTIVE
RIGHTS, THEIR INTERESTS WITH RESPECT TO OUR BUSINESS AND DISTRIBUTIONS MAY
CONFLICT WITH YOUR INTERESTS.
Some of our directors may hold, directly or indirectly, subordinated shares
and/or incentive rights. Decisions of the board of directors with respect to the
amount and timing of asset purchases and sales, cash expenditures, borrowings,
issuances of additional common shares and the creation, reduction, cancellation
or increase of reserves in any quarter will affect whether, or the extent to
which, there is sufficient available cash from our operating surplus to meet the
target quarterly distribution and additional distribution levels on all common
and subordinated shares in a given quarter or in subsequent quarters. In
addition, actions by the board of directors may have the effect of enabling the
holders of subordinated shares or incentive rights to receive distributions on
subordinated shares or incentive distributions or hastening the expiration of
the subordination period or the conversion of subordinated shares into common
shares.
Netherlands Antilles law protecting the interests of minority shareholders
may not be as protective in all circumstances as the law protecting minority
shareholders in U.S. jurisdictions. In addition, under Netherlands Antilles law,
liability of corporate directors is basically limited to cases of willful
malfeasance and gross negligence. The articles of Statia Terminals Group permit
it to indemnify its directors except in cases where the director acted in bad
faith or a manner in which he did not reasonably believe to be in, or not
opposed to, our best interests.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION OF YOUR COMMON
SHARES.
The assumed initial public offering price of $20.00 per common share
exceeds the pro forma tangible net book value of $10.02 per common share. You
will incur immediate and substantial dilution of tangible net book value of
$9.98 per common share.
IF WE DISTRIBUTE TO YOU AVAILABLE CASH FROM INTERIM CAPITAL TRANSACTIONS, WE
MAY REDUCE YOUR SHARE OF FUTURE DISTRIBUTIONS IN RELATION TO THE INCENTIVE
RIGHTS.
We may generate available cash from interim capital transactions, which are
generally sources other than operations or working capital borrowings. If we
distribute to you available cash from interim capital transactions, we will
reduce proportionately the target quarterly distribution and the additional
distribution levels. If we distribute enough available cash from interim capital
transactions to pay back to you the entire initial public offering price of your
common shares plus any common share arrearages, the holders of common and
subordinated shares will be entitled to only 50% of future distributions of
available cash and holders of the incentive rights will be entitled to receive
the remaining 50%.
YOU MAY NOT BE ABLE TO SUE US EFFECTIVELY IN THE NETHERLANDS ANTILLES OR
CANADA.
Netherlands Antilles
Statia Terminals Group is incorporated under the laws of the Netherlands
Antilles, and all of its operating assets are located outside the U.S.
Accordingly, it may not be possible to effect service of process on Statia
Terminals Group within the U.S. other than through its appointed agent for
service of process. In addition, it may be difficult for holders of common
shares to realize in the Netherlands Antilles upon a judgment rendered against
Statia Terminals Group in a U.S. court.
We have been advised by our Netherlands Antilles counsel, Smeets Thesseling
van Bokhorst Spigt as follows. Legal actions may be instituted directly against
Statia Terminals Group in the Netherlands Antilles. However, to enforce in the
Netherlands Antilles a judgment for the payment of money obtained against Statia
Terminals Group in U.S. courts, an enforcement action must be brought before a
competent Netherlands Antilles court. A Netherlands Antilles court will
generally recognize a U.S. judgment if:
o procedural protections provided in the Netherlands Antilles have been
observed; and
o the judgment obtained in the U.S. and the proceedings related to it are
not contrary to natural justice or public policy in the Netherlands
Antilles.
11
<PAGE>
If a U.S. judgment is not recognized by a Netherlands Antilles court,
relitigation of the merits will be required in order to obtain enforcement of
the judgment in the Netherlands Antilles. In addition, it is unlikely that:
o the courts of the Netherlands Antilles would enforce judgments entered by
U.S. courts predicated upon the civil liability provisions of the U.S.
federal securities laws; or
o actions can be brought in the Netherlands Antilles in relation to civil
liabilities predicated upon the U.S. federal securities laws.
Canada
Our subsidiary, Statia Terminals Canada, Incorporated is incorporated under
the laws of Nova Scotia, Canada, and all of its assets are located outside the
U.S., primarily in the Province of Nova Scotia, Canada. Accordingly, it may not
be possible to effect service of process on Statia Terminals Canada within the
U.S. other than through its appointed service of process agent. In addition, it
may be difficult for holders of common shares to realize in Canada upon a
judgment obtained against Statia Terminals Canada in a U.S. court.
We have been advised by our Nova Scotia counsel, Stewart McKelvey Stirling
Scales as follows. Legal actions may be instituted directly against Statia
Terminals Canada in the Province of Nova Scotia and a Nova Scotia court would
recognize and enforce a final judgment obtained against Statia Terminals Canada
in a U.S. court provided that:
o the U.S. court validly took jurisdiction under Nova Scotia law;
o the judgment was not obtained by fraud, or in a manner contrary to
natural justice and its enforcement would not be inconsistent with public
policy, as applied by a Nova Scotia court; and
o the enforcement of such judgment in Nova Scotia does not constitute
directly or indirectly the enforcement of U.S. penal law.
Such Nova Scotia counsel has also advised that there is some doubt that:
o the courts of the Province of Nova Scotia would enforce judgments entered
by U.S. courts predicated upon the civil liability provisions of the U.S.
federal securities laws; and
o actions can be brought in the Province of Nova Scotia in relation to
civil liabilities predicated upon the U.S. federal securities laws.
CASTLE HARLAN AND OUR MANAGEMENT HAVE PRACTICAL CONTROL OVER MOST MATTERS
REQUIRING SHAREHOLDER APPROVAL.
Upon the closing of the offering, all of the subordinated shares and
incentive rights will be transferred to Statia Terminals Holdings N.V., a
Netherlands Antilles corporation that will be controlled by Castle Harlan, the
directors and executive officers of Statia Terminals Group and their affiliates.
As a result, Statia Terminals Holdings will own approximately 33% of the
outstanding shares entitled to vote. As a result of this ownership, restrictions
on transfer of the common shares and provisions of Netherlands Antilles law,
Statia Terminals Holdings will be able to exercise practical control over most
matters requiring shareholder approval, including the election of directors.
A NON-NEGOTIATED CHANGE OF CONTROL IS UNLIKELY.
Netherlands Antilles law and the articles of Statia Terminals Group would
make it more difficult for a third party to acquire control of us without the
cooperation of Statia Terminals Holdings, even if such change in control would
be beneficial to shareholders.
THERE MAY NOT BE A MARKET FOR OUR COMMON SHARES.
Prior to the offering, there has been no public market for the common
shares. We have applied for quotation of the common shares on the Nasdaq
National Market. However, we can provide no assurances that a trading market for
the common shares will develop on the Nasdaq National Market or that you will be
able to sell your shares quickly.
12
<PAGE>
RISKS INHERENT IN OUR BUSINESS
OUR OPERATIONS ARE LARGELY DEPENDENT ON THE DEMAND FOR CRUDE OIL AND
PETROLEUM PRODUCTS IMPORTED INTO THE U.S. AND A DECREASE IN SUCH DEMAND MAY
ADVERSELY AFFECT OUR FINANCIAL RESULTS.
Our operations are largely dependent on the demand for crude oil and
petroleum products imported into the U.S. The demand for imported crude oil and
petroleum products in the U.S. is influenced by a number of factors, including
weather conditions, economic growth, pricing of petroleum products and
substitute products, government policy, transportation costs, domestic
production and refining capacity and utilization. Changes in government
regulation that affect the petroleum industry, including the imposition of a
surcharge on imported oil or an increase in taxes on crude oil and oil products,
could adversely affect our business. These factors are beyond our control, and
we can give no assurances that conditions affecting supply and demand of crude
oil and petroleum products favorable to our business and financial condition and
our ability to make the target quarterly distribution will exist.
FORWARD AND CURRENT PRICING OF CRUDE OIL AND PETROLEUM PRODUCTS AND ANY
REDUCED AVAILABILITY OR INCREASED COST OF TANKERS MAY ADVERSELY AFFECT OUR
FINANCIAL RESULTS.
We intend to make a target quarterly distribution based upon our available
cash, if any. Our available cash is directly affected by changes in the
relationship between forward and current pricing of crude oil and petroleum
products. We have experienced losses in recent years.
When the forward prices for crude oil and petroleum products that we store
fall below spot prices for any length of time, customers using our storage
facilities are less likely to store such product, thereby reducing storage
utilization levels. This market condition is referred to as "backwardation."
When forward prices exceed spot prices for any length of time the market is said
to be in "contango." When the crude oil and petroleum products market is in
contango for a specific product by an amount exceeding storage costs, time value
of money, cost of a second vessel and the cost of loading and unloading at the
terminal, the demand for storage capacity at our terminals for such product
usually increases. Thus, our operations are also dependent on the availability
of and the reasonableness of charter rates of very-large and ultra-large crude
carriers to transfer products to our facilities and of smaller vessels to
subsequently transfer products from our facilities to downstream users.
Historically, heating oil has been in contango during the summer months and
gasoline has been in contango during the winter months. We can give no
assurances that the market will follow this pattern in the future. For example,
from the beginning of 1995 to late 1997, all segments of the crude oil and
petroleum products markets were generally in backwardation. As a result, we
believe that utilization of our facilities was adversely impacted during that
period. Since late 1997 all segments of the crude oil and petroleum products
markets have generally been in contango, and consequently we are currently
experiencing an increase in the utilization of our facilities. We had losses in
1996, 1997 and 1998. The forward pricing market began to move toward contango in
late 1997 and remained in contango for a full year in 1998. Our net losses
decreased from $8.4 million in 1997 to $1.5 million in 1998. On a pro forma
basis, our net income increased from $1.7 million in 1997 to $9.7 million in
1998. However, we can give no assurances that such market conditions will
continue.
IF WE CANNOT RENEW OR REPLACE THE LONG-TERM CONTRACTS WITH ONE OF OUR TWO
MAJOR CUSTOMERS WITHIN THE NEXT 12 MONTHS, THEN OUR BUSINESS, FINANCIAL
CONDITION AND ABILITY TO PAY THE TARGET QUARTERLY DISTRIBUTION MAY BE
ADVERSELY AFFECTED.
Revenues from Bolanter Corporation N.V., an affiliate of Saudi Aramco,
constituted approximately 8.9% of our total 1998 revenues and an additional 7.7%
was generated by the movement of Bolanter's products through our St. Eustatius
terminal. We can give no assurances that this long-term contract will be renewed
at the end of its term, January 31, 2000. If we fail to renew or replace this
contract or we otherwise lose any significant portion of our revenues from this
customer, we may suffer a material adverse effect on our business, financial
condition and ability to make the target quarterly distribution. We also have
long-term contracts with other key customers. We can give you no assurance that
these contracts will be renewed at the end of their terms or that we will
13
<PAGE>
be able to enter into other long-term contracts on terms favorable to us, or at
all.
IF THE BENEFICIAL TAX STATUS OF OUR FACILITIES IS TERMINATED, OUR BUSINESS,
FINANCIAL CONDITION AND ABILITY TO MAKE THE TARGET QUARTERLY DISTRIBUTION
MAY BE ADVERSELY AFFECTED.
Our St. Eustatius facility has qualified for designation as a free trade
zone and our Point Tupper facility has qualified for designation as a customs
bonded warehouse. Such status allows customers and us to transship commodities
to other destinations with minimal Netherlands Antilles or Canadian tax effects.
Pursuant to a Free Zone and Profit Tax Agreement with the island government
of St. Eustatius which is scheduled to expire on December 31, 2000, we are
subject to a minimum annual tax of 500,000 Netherlands Antilles guilders, or
approximately $282,000. This agreement provides that any amounts paid to meet
the minimum annual payment will be available to offset future tax liabilities
under the agreement to the extent that the minimum annual payment is greater
than 2% of taxable income. We can give no assurances that this agreement will be
extended on terms favorable to us, or at all.
In Canada, the customs bonded warehouse designation expires annually. We
routinely renew this designation through compliance with regulations, including
providing evidence of bonding arrangements and fee payments. It is possible that
we could lose our customs bonded warehouse designation in Canada through non-
compliance, inability to obtain the necessary bonding arrangements or as a
result of significant changes in regulations.
Should these free trade zone or custom bonded warehouse designations
terminate, our business, financial condition and ability to make the target
quarterly distribution may be adversely impacted.
A SCHEDULED EXPIRATION OF SOME OF OUR TAX DEDUCTIONS AND CREDITS COULD
INCREASE OUR CANADIAN INCOME TAXES AND MAY ADVERSELY AFFECT OUR ABILITY TO
MAKE THE TARGET QUARTERLY DISTRIBUTION.
Some of the net operating loss and investment tax credit carryforwards of
Statia Terminals Canada are scheduled to expire at various times through the
year 2002. We expect that in 1999, these carryforwards will reduce our Canadian
income tax expense by approximately $2.3 million. Therefore, if the operations
of Statia Terminals Canada do not produce increasing after-tax cash flow
sufficient to offset any increase in taxes resulting from such expirations, or
if we do not otherwise offset any shortfall in available cash required to make
the target quarterly distribution, we may not be able to make the full amount of
the target quarterly distribution on all of the common and subordinated shares.
ADVERSE WEATHER SUCH AS HURRICANES CAN NEGATIVELY AFFECT OUR OPERATIONS.
Our operations are disrupted from time to time by adverse weather
conditions. Since its construction in 1982, our St. Eustatius facility has been
adversely impacted by six hurricanes. The three that most seriously affected us
occurred in the third and fourth quarters of 1995. Operations at the St.
Eustatius facility ceased for varying lengths of time from August 28, 1995 to
October 3, 1995, and during September 1995, vessel calls at the St. Eustatius
facility decreased substantially. Through December 31, 1997, we spent
$20.6 million on repairs and improvements related to the 1995 hurricanes of
which $12.6 million was covered by insurance. Hurricane Georges in September
1998 caused approximately $5.8 million in damage of which all but $0.5 million
was covered by insurance. We have no business interruption insurance, except
with respect to our offshore single point mooring system.
COST COMPETITION FROM LIGHTERING AND LARGER AND WELL-FINANCED COMPETITORS
MAY HAVE AN ADVERSE AFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND ABILITY
TO MAKE THE TARGET QUARTERLY DISTRIBUTION.
Our principal competition with respect to our transshipment business is
from lightering. Under current market conditions, lightering is generally less
expensive than terminaling, and it is possible that an increasing percentage of
our transshipment business could be handled through lightering competitors. In
addition, some companies offering marine terminaling facilities have more
storage capacity and greater financial and other resources than we do. We
believe that most of our principal competitors are less highly-leveraged than we
are and may therefore have greater financing and operating flexibility than we
do. We can give no assurances that we will not encounter increased competition
in the future, which could have a material adverse effect on our business,
financial
14
<PAGE>
condition and our ability to make the target quarterly distribution.
ENVIRONMENTAL RISKS AND NEW GOVERNMENTAL REGULATIONS MAY INCREASE THE COST
OF OUR OPERATIONS AND GIVE RISE TO UNEXPECTED LIABILITIES.
Our operations and properties are subject to laws and regulations in our
geographic areas of operation relating to environmental, health and safety
matters. The nature of our operations and previous operations by others at our
facilities exposes us to the risk of claims with respect to environmental,
health and safety matters, and we can give no assurances that we will not incur
material costs or liabilities in connection with such claims. The costs
associated with our planned environmental investigation, remediation and
upgrading at the Point Tupper terminal could be substantial, although we believe
most of such costs are the responsibility of Praxair under an indemnity given in
connection with the Castle Harlan acquisition. We believe that the remainder are
covered by accruals. As of December 31, 1998, our environmental accruals were
approximately $1.5 million. We do not have cash reserves set aside equal to such
accruals. In addition, future events, such as the discovery of environmental
conditions, changes in existing laws and regulations or their interpretation,
the issuance of penalties for regulatory violations, or more vigorous
enforcement policies of regulatory agencies, may give rise to unexpected
expenditures or liabilities that could be material to our business, financial
condition and our ability to make the target quarterly distribution. For a more
detailed discussion of our environmental, health and safety matters, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Environmental, Health and Safety Matters" and
"Business--Environmental, Health and Safety Matters."
PRAXAIR MAY DISPUTE OR DELAY PAYMENTS WITH RESPECT TO ITS INDEMNITY
OBLIGATIONS TO US, AND SUCH DISPUTES OR DELAYS MAY AFFECT OUR ABILITY TO PAY
THE TARGET QUARTERLY DISTRIBUTION.
When Castle Harlan acquired us from Praxair, Praxair agreed to indemnify us
from the costs of some matters, including some environmental, tax and legal
matters. Any dispute or delay in payment under Praxair's indemnification
obligations to us could affect our ability to pay the target quarterly dividend
during a particular quarter or quarters.
THE ELECTRONIC DATE-SENSITIVE EQUIPMENT AT OUR TERMINALING FACILITIES AND
ADMINISTRATIVE OFFICES MAY NOT BE READY FOR YEAR 2000 PROBLEMS.
We can give no assurance that our programs designed to minimize the impact
of the transition to the year 2000 on our electronic date-sensitive equipment,
including the terminal operations software at our facilities, will be completely
successful or that the costs of implementing them will not exceed our current
estimates. If they are not, the date change from 1999 to 2000 could materially
affect our results of operations, financial condition or our ability to make the
target quarterly distribution. Our operations may also be negatively affected by
the inability of third parties, including our major customers and suppliers,
with whom we deal to manage this problem in a timely manner. The full extent of
any adverse impact on us is impossible to determine. For a more detailed
discussion of our year 2000 readiness, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Information Technology and the
Year 2000."
15
<PAGE>
THE RESTRUCTURING
In November 1996 Castle Harlan, our management and others acquired control
of us from Praxair. As part of this acquisition:
o we issued $40 million of preferred stock to Praxair;
o we issued $55 million of preferred stock and common stock to Castle
Harlan and its affiliates;
o we issued $4.5 million of preferred stock and common stock to particular
members of our management;
o we issued $1.5 million of preferred stock and common stock to a
consultant of ours;
o Statia Terminals International received a capital contribution of
$98.5 million from Statia Terminals Group, consisting of $55.5 million of
cash and $43.0 million of equity in some of our subsidiaries; and
o Statia Terminals International and Statia Terminals Canada, Incorporated
issued $135.0 million of mortgage notes.
We used a portion of the contributed capital and proceeds from the issuance of
the mortgage notes to:
o pay the cash portion of the purchase price of approximately
$174.1 million to Praxair, and
o pay $16.0 million of commissions, fees and expenses.
In connection with but prior to the acquisition, Praxair repaid all of our
third-party indebtedness, including an off-balance sheet lease obligation, bank
debts, preferred stock from a former affiliate and related party advances.
All of the currently outstanding stock of the issuer is owned as follows:
o Praxair holds 20,000 shares of Series A Preferred Stock, 10,000 shares of
Series B Preferred Stock and 10,000 shares of Series C Preferred Stock;
o Castle Harlan and its affiliates hold 13,850 shares of Series D Preferred
Stock, 33,750 shares of Series E Preferred Stock and 33,750 shares of
common stock;
o particular directors and members of our management hold 4,724 shares of
Series E Preferred Stock and 4,724 shares of common stock and options to
acquire an additional 6,145 shares of common stock; and
o other shareholders hold 2,500 shares of Series E Preferred Stock and
2,500 shares of common stock.
There are no subordinated shares or incentive rights outstanding, and Statia
Terminals Group's currently outstanding common stock, all of which will be
reclassified by Statia Terminals Group at the closing of this offering as
described in the next paragraph, does not have the same rights and provisions as
the common shares offered through this prospectus.
Upon the issuance of the common shares at the closing of this offering
Statia Terminals Group will redeem or reclassify all of its currently
outstanding capital stock and issue the subordinated shares and incentive rights
as follows:
o using the net proceeds of this offering, Statia Terminals Group will
redeem all of its Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock at their respective liquidation preferences plus all cumulative
unpaid dividends on such preferred stock;
o Statia Terminals Group will reclassify the 47,119 shares of its
outstanding common stock (which will include 6,145 shares of common stock
to be issued upon exercise of options at or by the closing) as 471,190
subordinated shares;
o Statia Terminals Group will issue an additional 3,328,810 subordinated
shares plus 38,000 incentive rights to the holders of the remaining
outstanding common stock; and
o all of the subordinated shares and incentive rights will be transferred
to Statia Terminals Holdings by the holders thereof.
16
<PAGE>
<TABLE>
<CAPTION>
SHARES ISSUED AND OUTSTANDING SHARES AND INCENTIVE RIGHTS TO BE
PRIOR TO THE RESTRUCTURING AND ACTION TO BE TAKEN PURSUANT TO ISSUED AND OUTSTANDING AFTER THE
OFFERING THE RESTRUCTURING AND OFFERING RESTRUCTURING AND OFFERING
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
20,000 Series A .................... Redeemed None
Preferred Shares
10,000 Series B .................... Redeemed None
Preferred Shares
10,000 Series C .................... Redeemed None
Preferred Shares
13,850 Series D .................... Redeemed None
Preferred Shares
40,974 Series E .................... Redeemed None
Preferred Shares
47,119 shares of common stock,
after exercise of options ........ Reclassified 471,190 subordinated shares
Additional issuance to holders of 3,328,810 subordinated shares
outstanding common stock 38,000 incentive rights
Public offering 7,600,000 common shares
</TABLE>
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of the
common shares offered through this prospectus will be approximately $142.1
million, or $156.3 million if the underwriters exercise their over-allotment
option in full, after deducting underwriting discounts and commissions but
before deducting fees and expenses incurred in connection with this offering. We
anticipate using the net proceeds of this offering and other cash on hand to:
o redeem all of Statia Terminals Group's Series A Preferred Stock,
Series B Preferred Stock, and Series C Preferred Stock for
$40.0 million;
o pay $9.2 million in accrued dividends, assuming this offering had closed
on March 31, 1999, with respect to Statia Terminals Group's Series A
Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock;
o redeem all of Statia Terminals Group's Series D Preferred Stock and
Series E Preferred Stock for approximately $54.8 million;
o purchase additional capital stock of Statia Terminals International for
approximately $37.7 million, all of which Statia Terminals International
will use to redeem or acquire 25% of its mortgage notes, including a
$4.0 million premium over par, or, if the underwriters exercise their
over-allotment option in full, approximately $52.8 million to redeem or
acquire 35% of the mortgage notes including a $5.6 million premium over
par; and
o pay approximately $5.1 million representing the fees and expenses
incurred in connection with this offering.
17
<PAGE>
CAPITALIZATION
The following table sets forth:
o our historical capitalization as of December 31, 1998,
o the pro forma transaction adjustments required to reflect the pro forma
transactions, including the sale of the common shares offered in this
prospectus, the application of the net proceeds from such sale as
described in "Use of Proceeds" and the restructuring, and
o our pro forma capitalization as of December 31, 1998.
The table is derived from, should be read in conjunction with, and is
qualified in its entirety by reference to the historical and pro forma financial
statements and notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998 (UNAUDITED)
----------------------------------------
(DOLLARS IN THOUSANDS)
TRANSACTION PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
Cash and cash equivalents................................................. $ 14,061 $ (3,487) $ 10,574
---------- --------- ---------
Long-term debt............................................................ 135,000 (33,750) 101,250
Redeemable Preferred Stock Series A through C............................. 40,000 (40,000) --
Stockholders' equity:
Preferred Stock Series D and E.......................................... 54,824 (54,824) --
Notes receivable from stockholders...................................... (1,474) -- (1,474)
Common stock............................................................ 4 (4) --
Common shares........................................................... -- 76 76
Subordinated shares..................................................... -- 38 38
Additional paid-in-capital.............................................. 363 135,709 136,072
Accumulated deficit..................................................... (10,386) (6,096) (16,482)
---------- --------- ---------
Total stockholders' equity........................................... 43,331 74,899 118,230
---------- --------- ---------
Total capitalization................................................. $ 218,331 $ 1,149 $ 219,480
---------- --------- ---------
---------- --------- ---------
</TABLE>
18
<PAGE>
DILUTION
On a pro forma basis as of December 31, 1998 after giving effect to the
restructuring and the issuance of the common and subordinated shares and
incentive rights, the tangible net book value of our assets would have been
approximately $114.6 million or $10.02 per common share, assuming an initial
public offering price of $20.00 per common share. The net tangible book value
before the offering does not include intangible assets with a book value of
$4.5 million. Pro forma net tangible book value per common share after the
offering is determined by dividing the total number of shares to be outstanding
after the offering made hereby into our pro forma net tangible book value, after
giving effect to the application of the estimated net proceeds of the offering
before deducting expenses incurred in connection with this offering. The total
number of shares to be outstanding after the offering will amount to 7,600,000
common shares, 3,800,000 subordinated shares and 38,000 incentive rights. For
purposes of the calculation, the net tangible book value after the offering does
not include intangible assets with a book value of $3.6 million. Purchasers of
common shares in the offering will experience substantial and immediate dilution
in tangible net book value per common share for financial accounting purposes,
as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per common share............................... $20.00
Net tangible book value (deficit) per common share before the offering............. $(3.83)
Increase in net tangible book value per common share attributable to new
investors....................................................................... 13.85
------
Less: Pro forma net tangible book value per common share after the offering.......... 10.02
------
Immediate dilution in net tangible book value per common share to new investors...... $ 9.98
------
------
</TABLE>
There could be additional future dilution if options are granted under the
new stock option plan described in "Management--New Share Option Plan."
The following table sets forth the number of shares that will be issued by
Statia Terminals Group and the total consideration to Statia Terminals Group
contributed by the purchasers of common shares in this offering upon the
consummation of the restructuring and the issuance of the common and
subordinated shares and incentive rights:
<TABLE>
<CAPTION>
COMMON AND/OR
SUBORDINATED SHARES
AND/OR INCENTIVE
RIGHTS ISSUED CONSIDERATION
---------------------- --------------------------
NUMBER PERCENT AMOUNT PERCENT
----------- ------- ------------- -------
<S> <C> <C> <C> <C>
Existing shareholders......................... 3,838,000 33.55% $ 38,380 0.03%
New investors ................................ 7,600,000 66.45 152,000,000 99.97
----------- ------- ------------- -------
Total......................................... 11,438,000 100.00% $ 152,038,380 100.00%
----------- ------- ------------- -------
----------- ------- ------------- -------
</TABLE>
This table assumes that the underwriters' over-allotment option is not exercised
and attributes a nominal value of $0.01 per incentive right to the incentive
rights.
19
<PAGE>
CASH DISTRIBUTION POLICY
QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH
We will make distributions to our shareholders for each of our fiscal
quarters prior to our liquidation in an amount equal to 100% of our available
cash, if any, for that quarter. We expect to make distributions of all available
cash within approximately 45 days after the end of each quarter, commencing with
the quarter ending June 30, 1999, to holders of record on the applicable record
date. We will adjust downward the target quarterly distributions and the
additional distributions levels for the period from the closing of this offering
through June 30, 1999 based on the actual length of that period.
The historical and pro forma cash generated during 1998 would not have been
sufficient to pay the target quarterly distribution during each quarter of 1998
on the number of shares that will be outstanding following this offering.
Available cash is defined in the glossary and generally means:
(1) all cash on hand
o at the end of any quarter; and
o borrowed after the end of that quarter for working capital purposes
less :
(2) the amount of cash reserves that is necessary or appropriate in the
reasonable discretion of our board of directors to:
o provide for the proper conduct of our business;
o comply with applicable law or any of our debt instruments or other
agreements; or
o provide funds for distributions for any one or more of the next four
fiscal quarters.
The reserves our board of directors may establish are not limited to reserves
under generally accepted accounting principles.
For each quarter during the subordination period, to the extent we have
enough available cash, a holder of common shares will have the right to receive
the target quarterly distribution, plus any common share arrearages, prior to
any distribution of available cash to the holders of subordinated shares. This
subordination feature will enhance our ability to make the target quarterly
distribution on the common shares during the subordination period.
Upon expiration of the subordination period, which generally will not occur
prior to June 30, 2004, all subordinated shares will be converted on a
one-for-one basis into common shares and will participate pro rata with all
other common shares in future distributions of available cash. Under particular
circumstances, up to 50% of the subordinated shares may convert into common
shares before the expiration of the subordination period. Common shares will not
accrue arrearages for distributions for any quarter after the end of the
subordination period.
DISTRIBUTIONS FROM OPERATING SURPLUS DURING SUBORDINATION PERIOD
We will make distributions of available cash from operating surplus, if
any, for any quarter during the subordination period in the following manner:
IN THIS ORDER
First, 100% to all common shares, pro rata
Second, 100% to all common shares, pro rata
Third, 100% to all subordinated shares, pro rata
After that, as described in "--Incentive Distributions."
IN THIS AMOUNT
On each common share, the target quarterly distribution for that quarter;
On each common share, the unpaid common share arrearages for all prior quarters
during the subordination period;
On each subordinated share, the target quarterly distribution for that quarter;
and
20
<PAGE>
DISTRIBUTIONS FROM OPERATING SURPLUS AFTER SUBORDINATION PERIOD
We will make distributions of available cash from operating surplus, if
any, for any quarter after the subordination period in the following manner:
IN THIS ORDER
First, 100% to all common shares, pro rata
After that, as described in "--Incentive Distributions."
IN THIS AMOUNT
On each common share, the target quarterly distribution for that quarter; and
OPERATING SURPLUS AND INTERIM CAPITAL TRANSACTIONS
We will characterize cash distributions as distributions from either
operating surplus or interim capital transactions. This distinction affects the
amounts distributed to holders of common and subordinated shares relative to the
holders of incentive rights, and also determines whether holders of subordinated
shares receive any distributions.
Operating surplus means generally, for any period prior to liquidation on a
cumulative basis, the sum of:
o $7.5 million;
o any net positive working capital on hand on the closing of this offering;
o all cash receipts through the last day of that period, other than from
interim capital transactions, consisting primarily of cash from
operations and from working capital borrowings; and
o cash receipts after the end of that period from working capital
borrowings;
less
o all of our operating expenses through the last day of that period; and
o cash reserves for future operating expenses.
Interim capital transactions are:
o borrowings other than working capital borrowings;
o sales of equity securities; and
o sales of assets for cash that are outside the ordinary course of
business.
We will treat available cash paid as a distribution from any source as a
distribution from operating surplus until the sum of all distributions we have
made since the closing of this offering equals the operating surplus as of the
end of the quarter before that distribution. This method avoids the difficulty
of trying to determine whether a distribution is from operating surplus or from
interim capital transactions. We will deem any available cash in excess of that
amount, regardless of its source, to be from interim capital transactions, and
pay it accordingly.
If we make distributions of available cash from interim capital
transactions on each common share in an aggregate amount per common share equal
to the initial price of that common share, plus any common share arrearages, the
distinction between operating surplus and interim capital transactions will
cease. We will treat all distributions after that date as if they were from
operating surplus. We do not anticipate that we will make significant
distributions from interim capital transactions.
21
<PAGE>
RESTRICTIONS ON DISTRIBUTIONS OF AVAILABLE CASH
Our ability to make distributions out of available cash to our shareholders
is generally subject to two sources of restrictions:
o restrictions imposed by the laws of the Netherlands Antilles, where we
are incorporated; and
o restrictions imposed by the indenture governing our operating
subsidiary's mortgage notes.
RESTRICTIONS IMPOSED BY NETHERLANDS ANTILLES LAW
Under Netherlands Antilles law, we may make distributions out of:
o profits; or
o reserves.
We establish profits at our annual general meeting of shareholders, to whom
we submit our financial statements for adoption. We may distribute this profit
or allocate it to reserves for later distribution, as long as our shareholder
equity exceeds the par value of our issued capital.
Also, we may declare and distribute one or more amounts as interim
dividends, to satisfy the target quarterly distribution, if at the time of
declaration we have a reasonable expectation that we will make enough profits
for the relevant financial year to justify the interim distribution.
RESTRICTIONS IMPOSED BY OUR OPERATING SUBSIDIARY'S INDENTURE
We are a holding company and depend entirely on dividends from our
subsidiary, Statia Terminals International, for our cash flow. The indenture
governing our subsidiary's mortgage notes prohibits it from paying a dividend to
us if:
o our subsidiary is or would be in default under the indenture;
o our subsidiary's consolidated fixed charge coverage ratio is less than
2.0 to 1; or
o the proposed dividend, together with any other restricted payments, would
be greater than our subsidiary's restricted payment availability, which
generally consists of 50% of its cumulative consolidated net income.
See "Restrictions on Distributions" for a more complete discussion of these
restrictions and their possible consequences.
SUBORDINATION PERIOD; CONVERSION OF SUBORDINATED SHARES
The subordination period will generally extend from the closing of this
offering until the tests set forth below have been met for any quarter ending on
or after June 30, 2004 for which:
(1) we have made distributions of available cash from operating surplus on the
common and subordinated shares for each of the three consecutive
non-overlapping four-quarter periods immediately preceding the date of
determination that equal or exceed the total target quarterly distribution
on all of the outstanding shares during those periods;
(2) we have generated adjusted operating surplus during each of the three
consecutive non-overlapping four-quarter periods immediately preceding the
date of determination that equals or exceeds the total target quarterly
distribution on all of the common and subordinated shares that were
outstanding on a fully diluted basis during those periods; and
(3) there are no outstanding common share arrearages.
Upon expiration of the subordination period, all remaining subordinated
shares will convert into common shares on a one-for-one basis and will
thereafter participate, pro rata, with the other common shares in distributions
of available cash.
Before the end of the subordination period, if we satisfy the tests for
ending subordination:
o for any quarter ending on or after June 30, 2002, one-quarter, or
950,000, of the subordinated shares will convert into common shares on a
one-to-one basis; and
22
<PAGE>
o for any quarter ending on or after June 30, 2003, an additional quarter,
or 950,000, of the subordinated shares will convert into common shares on
a one-to-one basis.
However, the early conversion of the second one-quarter of subordinated shares
may not occur until at least one year following the early conversion of the
first one-quarter of subordinated shares.
"Adjusted operating surplus" for any period generally means:
(1) the operating surplus generated during that period;
less
(2) any net increase in working capital borrowings during that period, and
(3) any net reduction in cash reserves for operating expenditures during
that period not relating to an operating expenditure made during that
period;
plus
(4) any net decrease in working capital borrowings during that period, and
(5) any net increase in cash reserves for operating expenditures during
that period required by any debt instrument for the repayment of
principal, interest or premium.
Operating surplus generated during a period is equal to the difference
between:
(1) the operating surplus determined at the end of that period; and
(2) the operating surplus determined at the beginning of the period.
DEFERRAL OF DISTRIBUTIONS ON SUBORDINATED SHARES
We will defer making payment of the first $6.8 million of distributions
that would have otherwise been made on the subordinated shares until the end of
the deferral period. Except as set forth in the next paragraph, we will deem
these deferred distributions to have been made for the purposes of determining
available cash, operating surplus, adjusted operating surplus, additional
distribution levels, early conversion rights and the expiration of the
subordination period. We may use the deferred amounts during the deferral period
for any business purpose other than to make distributions on the subordinated
shares.
After the deferral period, we will pay to the subordinated shares, until
the deferred distributions have been paid in full, all available cash from
operating surplus remaining after all common share arrearages are paid, and the
target quarterly distribution is paid on all common and subordinated shares,
prior to any further distribution under the provisions set out herein.
The deferral period will generally extend from the closing of this offering
until the tests set forth below have been met for any quarter ending on or after
June 30, 2001 for which:
o we have made distributions of available cash from operating surplus on
the common and subordinated shares, including deferred distributions, for
each of the two consecutive non-overlapping four-quarter periods
immediately preceding the date of determination that equal or exceed the
sum of the target quarterly distribution on all of the outstanding shares
during those periods;
o we have generated the adjusted operating surplus during each of the two
consecutive non-overlapping four-quarter periods immediately preceding
the date of determination that equals or exceeds the sum of the target
quarterly distribution on all of the common and subordinated shares that
were outstanding on a fully diluted basis during those periods; and
o there are no outstanding common share arrearages.
Upon early conversion, we will reallocate pro rata any unpaid deferred
distributions allocable to the subordinated shares so converted to the remaining
unconverted subordinated shares.
23
<PAGE>
INCENTIVE DISTRIBUTIONS
The incentive rights are non-voting shares which represent the right to
receive an increasing percentage of quarterly distributions of available cash
from operating surplus after the target quarterly distributions and the
additional distribution levels have been achieved. The additional distribution
levels are based on the amounts of available cash from operating surplus paid as
distributions in excess of the payments made for the target quarterly
distributions and common share arrearages, if any.
In order to be able to make incentive distributions for any quarter, we
first must distribute available cash from operating surplus:
o to the holders of common and subordinated shares in an amount equal to
the target quarterly distribution on all common and subordinated shares;
and
o to the holders of common shares in an amount equal to any unpaid common
share arrearages.
After we have satisfied these tests, we will make distributions of available
cash, if any, to the holders of common shares and subordinated shares and the
holders of incentive rights in the following manner:
IN THIS ORDER
First, 85% to all common and subordinated shares, pro rata, and 15% to the
incentive rights, pro rata
Second, 75% to all common and subordinated shares, pro rata, and 25% to the
incentive rights, pro rata
After that, 50% to all common and subordinated shares, pro rata, and 50% to the
incentive rights, pro rata
IN THIS AMOUNT
On each common and subordinated share, a total of $0.495, including the target
quarterly distribution, for that quarter. That amount is the "first additional
distribution";
On each common and subordinated share, a total of $0.675, including the target
quarterly distribution, for that quarter. That amount is the "second additional
distribution"; and
No maximum
DISTRIBUTIONS FROM INTERIM CAPITAL TRANSACTIONS
We will make distributions of available cash from interim capital
transactions in the following manner:
IN THIS ORDER
First, 100% to all common and subordinated shares, pro rata
Second, 100% to all common shares, pro rata
After that, all distributions of available cash from interim capital
transactions will be made as if they were from operating surplus
IN THIS AMOUNT
On each common share, distributions equal to the initial price;
On each common share, unpaid common share arrearages for all prior quarters
during the subordination period; and
No maximum
24
<PAGE>
When we make a distribution of available cash from interim capital
transactions, we will adjust the target quarterly distribution and the
additional distribution levels downward by multiplying each such amount by a
fraction equal to:
(1) the initial price of the common shares reduced by that distribution,
and all prior distributions, of available cash from interim capital
transactions. This is the "unrecovered initial price;"
divided by
(2) the initial price, or the unrecovered initial price, as the case may
be, of the common shares immediately prior to that distribution of
available cash from interim capital transactions.
This adjustment to the target quarterly distribution may make it more
likely that subordinated shares will be converted into common shares, whether
upon the termination of the subordination period or the early conversion of some
subordinated shares, and may accelerate the dates at which those conversions
occur.
A "payback" of the initial price occurs when the unrecovered initial price
of the common shares is zero and any accrued common share arrearages have been
paid. At that time, the target quarterly distribution and each of the additional
distribution levels will have been reduced to zero for subsequent quarters. We
will then treat all distributions of available cash from all sources as if they
were paid from operating surplus. Because the target quarterly distribution and
the additional distribution levels will have been reduced to zero, the holders
of incentive rights will be entitled to receive 50% of all distributions of
available cash in addition to any distribution to which they may be entitled as
holders of common and subordinated shares.
Distributions of available cash from interim capital transactions will not
reduce the target quarterly distribution or additional distribution levels for
the quarter in which they are made.
ADJUSTMENT OF TARGET QUARTERLY DISTRIBUTION AND ADDITIONAL DISTRIBUTION LEVELS
We will reduce the target quarterly distribution and additional
distribution levels upon a distribution of available cash from interim capital
transactions. Also, if we effect a combination or subdivision of the common
shares, we will proportionately adjust the following amounts upward or downward,
as appropriate:
o the target quarterly distribution;
o the additional distribution levels;
o the unrecovered initial price;
o the number of additional common shares issuable during the subordination
period without a shareholder vote;
o the number of common shares issuable upon conversion of the subordinated
shares; and
o other amounts calculated on a per common and/or subordinated share basis.
For example, if we effect a two-for-one split of the common shares and
there are no prior adjustments, we will reduce each of the target quarterly
distributions, the additional distribution levels and the initial price of the
common shares to 50% of its initial level.
DISTRIBUTION OF CASH UPON LIQUIDATION
If we undergo a dissolution and liquidation, our assets will be sold or
otherwise disposed of. We will apply the proceeds of liquidation:
o first, to the payment of our creditors in the order of their priority;
and
o then, for distribution to the holders of common and subordinated shares
and the holders of incentive rights in order of their priority.
In liquidation, the holders of common shares will be entitled to receive
their unrecovered initial price and the target quarterly distribution due on
such common shares plus any unpaid common share arrearages before we make any
distributions to holders of subordinated shares.
25
<PAGE>
If we liquidate before the end of the subordination period, we will apply
any distribution as follows:
<TABLE>
<S> <C>
IN THIS ORDER IN THIS AMOUNT
First, 100% to all common shares, pro rata On each common share, an amount equal to the sum of:
(1) the unrecovered initial price of that common
share;
(2) the amount of the target quarterly distribution
for the quarter during which our liquidation occurs;
and
(3) any unpaid common share arrearages on that common
share;
Second, 100% to all subordinated shares, pro rata On each subordinated share, an amount equal to the sum
of:
(1) the unrecovered initial price of that subordinated
share;
(2) the amount of the target quarterly distribution
for the quarter during which our liquidation occurs;
and
(3) any unpaid deferred distributions on that
subordinated share;
Third, 85% to all common and subordinated shares, pro On each common and subordinated share, an amount equal
rata, and 15% to the incentive rights, pro rata to:
(1) the cumulative excess per share of the first
additional distribution over the target quarterly
distribution for each quarter,
less
(2) the cumulative amount per share of any prior
distributions of available cash from operating surplus
in excess of the target quarterly distribution that we
paid 85% to the common and subordinated shares, pro
rata, and 15% to the incentive rights for each
quarter, pro rata;
Fourth, 75% to all common and subordinated shares, pro On each common and subordinated share, an amount equal
rata, and 25% to the incentive rights, pro rata to:
(1) the cumulative excess per share of the second
additional distribution over the first additional
distribution for each quarter,
less
(2) the cumulative amount per share of any prior
distributions of available cash from operating surplus
in excess of the first additional distribution that we
paid 75% to the common and subordinated shares, pro
rata, and 25% to the incentive rights for each
quarter, pro rata; and
After that, 50% to all common and subordinated shares, No maximum
pro rata, and 50% to the incentive rights, pro rata
</TABLE>
26
<PAGE>
RESTRICTIONS ON DISTRIBUTIONS
RESTRICTIONS IMPOSED BY NETHERLANDS ANTILLES LAW
Under Netherlands Antilles law, we may make one or more distributions to
our shareholders out of legally available funds. These distributions can be made
out of our profits or reserves. We establish profits at our annual general
meeting of shareholders after we prepare and submit the balance sheet and profit
and loss account to our shareholders. Upon adoption of these financial
statements at the annual general meeting of shareholders, the profit, if any, is
set as the positive balance of the profit and loss account, after allocation of
amounts to reserves or creation of one or more provisions. Our articles provide
that we may distribute such profit, as we deem fit. In addition, our articles
provide that we may allocate, in whole or in part, any profit amounts to the
profit reserves and make distributions therefrom, as well as to distribute out
of reserves.
Notwithstanding the above, we may declare and distribute one or more
interim distributions in the form of interim dividends, as an advance payment of
expected profits. We may make this declaration only if we have, at the time of
such declaration, the reasonable expectation that we will make sufficient
profits for the relevant financial year to justify the interim distributions.
However, at the time of the declaration of the interim distribution, we may
further determine that any amounts not covered by the profits shall be qualified
as distribution out of freely distributable reserves, if any, such as the
capital surplus, being the aggregate amounts paid in excess of the par value per
share by each holder of common or subordinated shares or incentive rights.
We may make the distribution out of profits and/or reserves generally to
shareholders insofar as our equity exceeds the nominal value of the issued and
outstanding capital. In addition, if the profits and loss account shows a loss
for any given year, and that loss cannot be covered by the reserves or
compensated in another manner, no profit can be distributed in any subsequent
year until that loss has been recovered or has been offset by reserves.
RESTRICTIONS IMPOSED BY INDENTURE
Statia Terminals Group is a holding company and depends entirely on
dividends from Statia Terminals International for its cash flow. Statia
Terminals International's ability to pay dividends to Statia Terminals Group is
subject to restrictions contained in the indenture relating to its mortgage
notes. Under the terms of the indenture, the payment by Statia Terminals
International of any dividend to Statia Terminals Group may not be made if at
the time of declaration:
o First, a default or event of default under the indenture shall have
occurred and be continuing or shall occur as a consequence thereof;
o Second, Statia Terminals International's consolidated fixed charge
coverage ratio for the prior four full fiscal quarters is less than 2.0
to 1; or
o Third, the amount of that dividend, when added to the aggregate amount of
all other dividends and other restricted payments made by Statia
Terminals International after November 27, 1996, exceeds the sum of:
(a) 50% of Statia Terminals International's cumulative consolidated
net income, from November 27, 1996 or, if cumulative consolidated
net income is a deficit, minus 100% of the deficit,
plus
(b) the net cash proceeds from the issuance and sale of Statia
Terminals International's capital stock.
With respect to the clause First above, such defaults or events of default
include:
o any breach of the indenture, including any failure to make any payments
on the mortgage notes,
o defaults on indebtedness of $2,500,000 or more in the aggregate;
o the obtaining of control of the board of directors of Statia Terminals
Group by any
person or group of persons acting together, other than our current
owners; and
o bankruptcy of any obligor on the mortgage notes.
There is no default or event of default under the indenture.
27
<PAGE>
With respect to the clause Second above, for the four fiscal quarters ended
December 31, 1998, Statia Terminals International's consolidated fixed charge
coverage ratio was 2.0 to 1 on an historical basis and 2.7 to 1 on a pro forma
basis, assuming that this offering had closed at the beginning of such period.
With respect to the clause Third above:
o for the period from November 27, 1996 through December 31, 1998, Statia
Terminals International's consolidated net income was $0.6 million; and
o we expect to use $37.7 million of the net proceeds of this offering, or
$52.8 million if the underwriters exercise their over-allotment option in
full, to purchase additional capital stock of Statia Terminals
International.
Statia Terminals International has not paid any dividends and has not made any
other restricted payments, and has not received any proceeds from the sale of
capital stock, which would be included in the calculation pursuant to clause
Third above.
The redemption of approximately $33.8 million principal amount plus a
redemption premium of $4.0 million of the mortgage notes at 111.75% of the
principal amount from the proceeds of this offering, or $47.3 million principal
amount plus a redemption premium of $5.6 million if the underwriters exercise
their over-allotment option in full, will have a favorable impact on Statia
Terminals International's consolidated fixed charge coverage ratio. We currently
intend to redeem the remainder of the mortgage notes on or about November 15,
2000 at 105.875% of the principal amount and, therefore, eliminate at that time
the restrictions imposed by the indenture. We expect to fund that redemption
principally from a refinancing, which may include the issuance of new debt. We
can give no assurances that we will be able to issue such debt at that time or,
if we are able to, how favorable the terms of such issuance will be. It is
likely that new debt would also contain restrictions on payment of dividends
under specific circumstances.
Based on the foregoing we believe that, at least through November 15, 2000,
the indenture restrictions will permit Statia Terminals International to pay
sufficient dividends to Statia Terminals Group to cover at least the target
quarterly distribution that would be required to be made on the common and
subordinated shares out of available cash from operating surplus.
28
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated condensed balance sheet as
of December 31, 1998 was prepared to illustrate the estimated effects of:
o the disposition of Statia Terminals Southwest,
o the elimination of the Castle Harlan management fee,
o this offering,
o the use of the net proceeds from this offering as described under "Use of
Proceeds,"
o the restructuring, and
o the transfer of the shares of Petroterminal de Panama, currently owned by
us, to a newly-formed corporation owned by our current owners other than
Praxair,
(collectively, the "pro forma transactions") as if such transactions had
occurred on December 31, 1998. The following unaudited pro forma statement of
operations for the year ended December 31, 1998 was prepared to illustrate the
estimated effects of the pro forma transactions as if they had occurred as of
January 1, 1998.
The unaudited pro forma consolidated condensed financial statements should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," our financial statements and the notes
thereto, and the other financial information included elsewhere or incorporated
by reference in this prospectus. This pro forma financial information is
provided for informational purposes only and does not purport to be indicative
of the results of operations or financial position which would have been
obtained had the pro forma transactions been completed on the dates indicated or
the financial condition or results of operations for any future date or period.
29
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents...................................... $ 14,061 $ 137,000 (a) $ 10,574
(102,264)(b)
(33,750)(c)
(507)(d)
(3,966)(e)
Accounts receivable............................................
Trade, net................................................... 7,562 -- 7,562
Other........................................................ 2,328 -- 2,328
Inventory, net................................................. 4,528 -- 4,528
Prepaid expenses............................................... 1,417 (1,181)(f) 236
-------- --------- ---------
Total current assets......................................... 29,896 (4,668) 25,228
Property and equipment, net...................................... 209,970 -- 209,970
Other noncurrent assets, net..................................... 5,744 (1,130)(g) 3,614
(1,000)(h)
-------- --------- ---------
$245,610 $ (6,798) $ 238,812
-------- --------- ---------
-------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable............................................... $ 9,306 $ -- $ 9,306
Accrued interest payable....................................... 2,027 (507)(d) 1,520
Other accrued expenses......................................... 15,946 (7,440)(b) 8,506
-------- --------- ---------
Total current liabilities.................................... 27,279 (7,947) 19,332
Long-term debt................................................... 135,000 (33,750)(c) 101,250
-------- --------- ---------
Total liabilities............................................ 162,279 (41,697) 120,582
-------- --------- ---------
Redeemable Preferred Stock Series A through C.................... 40,000 (40,000)(b) --
Preferred stock:
Preferred Stock Series D and E................................. 54,824 (54,824)(b) --
Notes receivable from stockholders............................. (1,474) -- (1,474)
Common stock..................................................... 4 (4)(a) --
Common shares.................................................... -- 76 (a) 76
Subordinated shares.............................................. -- 38 (a) 38
Additional paid-in-capital....................................... 363 136,890 (a) 136,072
(1,181)(f)
Accumulated deficit.............................................. (10,386) (3,966)(e) (16,482)
(1,000)(h)
(1,130)(g)
-------- --------- ---------
Total stockholders' equity................................... 43,331 74,899 118,230
-------- --------- ---------
$245,610 $ (6,798) $ 238,812
-------- --------- ---------
-------- --------- ---------
</TABLE>
30
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 (J)
---------------------------------------------------------------------
DISPOSITION
HISTORICAL ADJUSTMENTS SUBTOTAL OF STSW(N) PRO FORMA
---------- ----------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Revenues........................................ $136,762 $ -- $136,762 $ (1,613) $ 135,149
Costs of services and products sold............. 106,688 -- 106,688 (1,674) 105,014
-------- ------- -------- -------- ------------
Gross profit.................................. 30,074 -- 30,074 61 30,135
Administrative expense.......................... 9,500 (1,350)(k) 8,150 -- 8,150
-------- ------- -------- -------- ------------
Operating income.............................. 20,574 1,350 21,924 61 21,985
Loss on disposition of property and equipment... 1,652 -- 1,652 (1,652) --
Interest expense................................ 16,851 (4,193)(l) 12,658 (7) 12,651
Interest income................................. 684 -- 684 -- 684
-------- ------- -------- -------- ------------
Income before provision for income taxes and
preferred stock dividends................... 2,755 5,543 8,298 1,720 10,018
Provision for income taxes...................... 320 -- 320 -- 320
-------- ------- -------- -------- ------------
Income before preferred stock dividends....... 2,435 5,543 7,978 1,720 9,698
Preferred dividends............................. 3,938 (3,938)(m) -- -- --
-------- ------- -------- -------- ------------
Net income (loss) available to holders of
common equity............................... $ (1,503) $ 9,481 $ 7,978 $ 1,720 $ 9,698
-------- ------- -------- -------- ------------
-------- ------- -------- -------- ------------
Pro forma diluted earnings per common and
subordinated share and incentive right(i):.... $ 0.85
------------
------------
Common and subordinated shares and incentive
rights outstanding in computing pro forma
diluted earnings per share:................... 11,438,000
------------
------------
</TABLE>
- ------------------------
31
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
(a) Reflects the issuance of 7,600,000 common shares, $0.01 par value, 3,800,000
subordinated shares, $0.01 par value, and 38,000 incentive rights, $0.01 par
value, in connection with this offering at an assumed initial public
offering price of $20 per common share. The estimated costs of this
offering, including the underwriting discount and estimated offering
expenses and fees, totaling $15 million have been reflected as an offset to
additional paid-in capital. The resulting net cash proceeds of this offering
total $137 million.
(b) Represents the retirement of Statia Terminals Group's Preferred Stock Series
A through Series E and accrued preferred stock dividends as of December 31,
1998.
(c) Reflects the redemption of 25% of Statia Terminals International's mortgage
notes.
(d) Represents the payment of accrued interest on 25% of Statia Terminals
International's mortgage notes.
(e) Represents a cash charge related to the early retirement of 25% of Statia
Terminals International's mortgage notes. This charge represents an
extraordinary loss on early retirement of debt; accordingly, this is not
reflected in the pro forma combined statements of operations.
(f) Represents the write-off of the balance of the prepaid Castle Harlan
management fee as of December 31, 1998.
(g) Represents the write-off of 25% of total capitalized bond issuance costs as
of December 31, 1998 related to Statia Terminals International's mortgage
notes. This charge represents an extraordinary loss on early retirement of
debt; accordingly, this is not reflected in the pro forma combined
statements of operations.
(h) Represents the transfer of the shares of Petroterminal de Panama to a
newly-formed corporation owned by the current owners of Statia Terminals
Group other than Praxair.
(i) Earnings per share data is not included on an historical basis as such
information would not be representative of the capital structure of Statia
Terminals Group after this offering.
(j) The following supplemental information is provided for EBITDA, historical
cash flows from operations and depreciation expense:
<TABLE>
<CAPTION>
DISPOSITION
HISTORICAL ADJUSTMENTS SUBTOTAL OF STSW(O) PRO FORMA
---------- ----------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
EBITDA......................................... $ 30,116 $ 1,350(1) $ 31,466 $1,416 $32,882
Cash flow from operations...................... $ 18,190 N/A N/A N/A N/A
Depreciation................................... $ 10,510 $ -- $ 10,510 $ (297) $10,213
</TABLE>
N/A Not applicable
EBITDA is defined as the sum of income before provision for income taxes and
preferred stock dividends, interest expense and depreciation.
(k) Represents the elimination of the Castle Harlan management fee payable by
Statia Terminals Group. The management fee will be eliminated in connection
with this offering (exclusive of certain expenses).
(l) Represents the reduction in interest expense and amortization of note
issuance costs resulting from the redemption of 25% of Statia Terminals
International's mortgage notes.
(m) Represents the elimination of preferred stock dividends resulting from the
retirement of Statia Terminals Group's Preferred Stock Series A through E.
(n) Reflects the exclusion of the operating results of Statia Terminals
Southwest.
32
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data for the periods and
as of the dates indicated. In January 1996, our former parent, CBI Industries,
was acquired by Praxair. The statement of operations data for each of:
o the period from January 1, 1996 through November 27, 1996,
o the period from November 27, 1996 through December 31, 1996, and
o the years ended December 31, 1997 and 1998
have been derived from and are qualified by reference to, our audited
consolidated financial statements included elsewhere in this prospectus. The
statement of operations data for the years ended December 31, 1993, 1994 and
1995 have been derived from the audited combined financial statements of Statia
Terminals, Inc. and its subsidiaries and affiliates not included in this
prospectus. The summary historical consolidated financial data set forth below
should be read in conjunction with, and is qualified by reference to,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Unaudited Pro Forma Consolidated Condensed Financial
Statements" and our consolidated financial statements and accompanying notes
thereto and other financial information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
PRE-CASTLE HARLAN ACQUISITION POST-CASTLE HARLAN ACQUISITION
------------------------------------------- ----------------------------------------
PRE-PRAXAIR ACQUISITION JANUARY 1, NOVEMBER 27,
---------------------------- 1996 1996
YEAR ENDED DECEMBER 31, THROUGH THROUGH YEAR ENDED DECEMBER 31,
---------------------------- NOVEMBER 27, DECEMBER 31, --------------------------
1993 1994 1995(5) 1996(5) 1996(5) 1997 1998(6)
-------- -------- -------- ------------ ------------ ------------ ------------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $112,076 $132,666 $135,541 $140,998 $ 14,956 $142,499 $136,762
Cost of services and products sold... 95,028 110,185 117,722 129,915 12,803 122,939 106,688
Gross profit......................... 17,048 22,481 17,819 11,083 2,153 19,560 30,074
Administrative expenses.............. 4,395 5,345 6,957 8,282 664 7,735 9,500
Operating income..................... 12,653 17,136 10,862 2,801 1,489 11,825 20,574
Loss (gain) on disposition of
property and equipment............. 7 (34) 59 (68) -- (109) 1,652
Interest expense..................... 726 3,114 4,478 4,187 1,613 16,874 16,851
Provision for income taxes........... 1,873 1,219 390 629 132 780 320
Net income (loss) available to common
stockholders....................... 10,046 10,944 4,569 (2,682) (522) (8,361) (1,503)
BALANCE SHEET DATA:
Total assets(1)...................... 186,420 197,357 230,283 N/M 260,797 246,479 245,610
Long-term debt....................... 59,843 56,400 51,600 N/M 135,000 135,000 135,000
Redeemable Preferred Stock Series A
through C.......................... -- -- -- N/M 40,000 40,000 40,000
Preferred Stock Series D and E(2).... -- -- -- N/M 61,000 61,000 54,824
Preferred stock...................... 11,212 18,057 18,589 N/M -- -- --
Total stockholders' equity........... 95,404 86,965 91,001 N/M 58,982 50,621 43,331
Net cash flow from (used in):
Operating activities................. (3,371) 25,706 11,476 9,108 2,235 9,770 18,190
Investing activities................. (23,355) (25,353) (36,908) (102,890) (178,033) (12,935) (4,092)
Financing activities................. 28,404 (1,679) 26,477 92,998 185,076 -- (6,150)
OPERATING DATA:
EBITDA(3)............................ 19,438 27,921 28,720 17,882 2,452 22,489 30,116
Consolidated fixed charge coverage
ratio under the indenture(4)....... -- -- -- -- 1.7x 1.5x 2.0x
Maintenance capital expenditures..... 7,791 6,867 9,975 12,887 1,203 4,401 9,000
Capacity (in thousands of barrels)... 11,590 15,387 20,387 20,387 20,387 20,387 19,566
Percentage capacity leased........... 79% 87% 76% 68% 74% 70% 91%
Throughput (in thousands of
barrels)........................... 37,591 60,630 109,805 81,994 13,223 118,275 119,502
Vessel calls......................... 967 1,063 973 922 108 1,030 1,027
</TABLE>
- ------------------
N/M Not meaningful--various transactions occurred prior to and in anticipation
of the Castle Harlan acquisition which cause the balance sheet data as of
November 27, 1996 to be not meaningful in comparison to the other period end
dates presented. Therefore, the information is not presented.
(1) The decrease in total assets between December 31, 1996 and 1997 is
primarily the result of lower cash, accounts receivable, and inventory
balances and net property and equipment.
(Footnotes continued on next page)
33
<PAGE>
(Footnotes continued from previous page)
(2) On July 29, 1998 a subsidiary of Statia Terminals International sold the
Brownsville facility and a payment of $6,150 was made from Statia
Terminals International to Statia Terminals Group for the redemption of a
portion of the Series D Preferred Stock.
(3) EBITDA is defined as the sum of (a) income before income tax provision
(benefit), (b) interest expense, (c) depreciation and amortization of
certain intangible assets and (d) the portion of First Salute lease
payments that represent interest expense for the periods prior to the
Castle Harlan acquisition. The amount of First Salute related interest
expense included in EBITDA was $5,741 for the year ended December 31,
1995, and $5,600 for the period ended November 27, 1996. Administrative
expenses include $3.0 million of non-cash, stock-based compensation
recognized on November 27, 1996 immediately prior to consummation of the
Castle Harlan acquisition. EBITDA is presented not as an alternative
measure of operating results or cash flow from operations (as determined
in accordance with generally accepted accounting principles), but rather
to provide additional information related to our debt servicing ability.
(4) The consolidated fixed charge coverage ratio is the ratio of adjusted
EBITDA to fixed charges; both computed as set forth in the indenture to
the mortgage notes. The indenture requires EBITDA for Statia Terminals
International to be adjusted for specified non-cash income and expense
items to compute adjusted EBITDA. The only such adjustment during the
period from November 27, 1996 through December 31, 1998 was the loss of
$1,652 from the sale of Statia Terminals Southwest which was excluded from
Statia Terminals International's adjusted EBITDA for the year ended
December 31, 1998. Adjusted EBITDA for Statia Terminals International also
excludes administrative expenses and the Castle Harlan management fee
incurred by Statia Terminals Group N.V. These administrative expenses and
the Castle Harlan management fee were $121, $1,285 and $2,089 for the
period from November 27, 1996 through December 31, 1996 and the years
ended December 31, 1997 and 1998, respectively. Statia Terminals
International's ability to pay dividends is restricted by the indenture to
the mortgage notes which generally requires, among other things, that it
pay dividends only when its consolidated fixed charge ratio is at least 2
to 1. A fixed charge coverage ratio of less than 2 to 1 also limits the
amount of indebtedness Statia Terminals International may incur.
(5) Prior to January 12, 1996, we were a wholly owned subsidiary of
CBI Industries. On January 12, 1996, pursuant to the merger agreement
dated December 22, 1995, CBI Industries became a wholly owned subsidiary
of Praxair. This transaction was reflected in our consolidated financial
statements as a purchase, effective January 1, 1996. On November 27, 1996,
Castle Harlan, members of our management and others acquired us from
Praxair. This transaction is reflected in our consolidated financial
statements effective November 27, 1996 as a purchase. The application of
purchase accounting at each acquisition date resulted in changes to the
historical cost basis of accounting for certain assets. Accordingly, the
information provided for periods before and after each of these
transactions is not comparable.
(6) Includes the operations of Statia Terminals Southwest through June 30,
1998.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For purposes of the discussion below, reference is made to our consolidated
balance sheets as of December 31, 1997 and 1998, and our consolidated income and
cash flow statements for the period January 1, 1996 through November 27, 1996,
after our acquisition by Praxair. Reference is also made to our consolidated
income and cash flow statements for the period November 27, 1996 through
December 31, 1996, after the acquisition by Castle Harlan, our management and
others, and the years ended December 31, 1997 and 1998. We prepare our financial
statements in accordance with U.S. generally accepted accounting principles.
To facilitate a meaningful discussion of our comparative operating
performance for the years ended December 31, 1996, 1997 and 1998, this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" presents financial information on a traditional comparative basis
for all periods unless otherwise indicated. Consequently, the information
presented below for the year ended December 31, 1996 does not necessarily comply
with the accounting requirements for companies subject to major acquisitions.
Generally accepted accounting principles in the U.S. call for the separate
reporting of our new company, after the Castle Harlan acquisition, and our
predecessor company, both before and after the Praxair acquisition. The solid
black lines in some of the tables separates financial information that may not
be comparable across periods.
Substantially all of our transactions are denominated in U.S. dollars. All
figures are in U.S. dollars unless otherwise indicated.
OVERVIEW OF OPERATIONS
We began our operations in 1982 as Statia Terminals N.V., a Netherlands
Antilles corporation, operating an oil products terminal located on the island
of St. Eustatius. In 1984, CBI Industries, an industrial gases and contracting
services company, acquired a controlling interest in Statia Terminals N.V. In
1986, Statia Terminals N.V. purchased Statia Terminals Southwest, with its
facility at Brownsville, Texas. In 1990, CBI Industries became the sole owner of
Statia Terminals N.V. and Statia Terminals Southwest. In 1993, we acquired full
control of Statia Terminals Point Tupper, Incorporated, located at Point Tupper,
Nova Scotia.
In January 1996, Praxair acquired CBI Industries. In November 1996, Castle
Harlan, our management and others acquired from Praxair all of the outstanding
capital stock of Statia Terminals N.V., Statia Terminals, Inc., their
subsidiaries and certain of their affiliates. Castle Harlan is a private equity
investment fund managed by Castle Harlan, Inc., a private merchant bank. At the
same time, Statia Terminals Point Tupper was amalgamated into Statia Terminals
Canada. Statia Terminals Canada and Statia Terminals International were
organized for purposes of facilitating the Castle Harlan acquisition. In July
1998, we sold Statia Terminals Southwest to an unaffiliated third party
purchaser.
During 1992, we invested in additional terminal facilities located at Point
Tupper, Nova Scotia. We completed refurbishment of this 7.4 million barrel
facility during 1994. The total capital investment was $74.1 million. At St.
Eustatius during the fourth quarter of 1993, we commenced construction of five
million barrels of crude oil storage and a single point mooring buoy, which was
completed and leased during the first quarter of 1995, with a total capital
investment of $107.5 million. Over the three-year period from 1993 to 1995, we
added crude oil storage and related services to our established fuel oil,
petroleum products, and other services. In addition to blending and other
ancillary services, we added marine emergency response services at each of our
facilities and added limited refining capability through our atmospheric
distillation unit at St. Eustatius during 1995. Finally, during the fourth
quarter of 1995 and the first quarter of 1996, we made investments in a heating
system and butane sphere at Point Tupper. These additions to capacity have led
to more throughput and, therefore, higher revenues from storage, throughput and
ancillary services. We did not make significant investments to expand our
operating capacity during 1997 and 1998.
The operations at St. Eustatius suffered damages from Hurricanes Iris, Luis
and Marilyn, causing closure of the terminal for approximately three weeks at
the end of the third quarter of 1995. Repair of damages caused by these
hurricanes and installation of some improvements were substantially completed by
the end of the third quarter of 1996. We spent $20.6 million on repairs and
improvements related to the hurricanes, $6.8 million of which was capitalized as
property and equipment. Claims related to the hurricanes were filed with
insurance carriers and ultimately settled for $12.6 million.
During September 1998, Hurricane Georges damaged the St. Eustatius
facility. Hurricane Georges did not significantly impact operations of the
facility which returned to normal within days of the storm. The preliminary
estimate of the damage to the facility is $5.8 million. Insulation on certain
35
<PAGE>
storage tanks, electrical transmission systems and roofs of several buildings
sustained damage. In advance of the storm, on September 19, 1998, the facility
ceased terminal operations and instituted its hurricane preparation and damage
prevention plan. The terminal returned to full operations by September 29, 1998.
During the third quarter of 1998, we recorded a charge of $0.8 million
representing an insurance deductible of $0.5 million related to the hurricane
damage and other costs resulting from the hurricane which we anticipate will not
be recovered through our insurance policies.
The following table sets forth for the periods indicated total capacity,
capacity leased, throughput and vessel calls for each of our operating
locations. "Total capacity" represents the average storage capacity available
for lease for a period. "Capacity leased" represents the storage capacity leased
to third parties weighted for the number of days leased in the month divided by
the capacity available for lease. "Throughput" volume is the total number of
inbound barrels discharged from a vessel, tank, rail car or tanker truck, not
including across-the-dock or tank-to-tank transfers. A "vessel call" occurs when
a vessel docks or anchors at one of our terminal locations in order to load
and/or discharge cargo and/or to take on bunker fuel. Such dockage or anchorage
is counted as one vessel call regardless of the number of activities carried on
by the vessel. A vessel call also occurs when we sell and deliver bunker fuel to
a vessel not calling at our terminals for the above purposes. Each of these
statistics is a measure of the utilization of our facilities.
CAPACITY, CAPACITY LEASED, THROUGHPUT AND VESSEL CALLS BY LOCATION
(CAPACITY AND THROUGHPUT IN THOUSANDS OF BARRELS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Netherlands Antilles and the Caribbean
Total capacity................................................................. 11,334 11,334 11,334
Capacity leased................................................................ 80% 76% 92%
Throughput..................................................................... 69,395 62,944 74,158
Vessel calls................................................................... 880 792 864
Canada
Total capacity................................................................. 7,404 7,404 7,404
Capacity leased................................................................ 55% 70% 93%
Throughput..................................................................... 23,350 53,011 43,468
Vessel calls................................................................... 62 125 104
Texas
Total capacity................................................................. 1,649 1,649 N/M
Capacity leased................................................................ 52% 31% N/M
Throughput..................................................................... 2,472 2,320 N/M
Vessel calls................................................................... 88 113 N/M
All locations (1)
Total capacity................................................................. 20,387 20,387 19,556
Capacity leased................................................................ 69% 70% 91%
Throughput..................................................................... 95,217 118,275 119,502
Vessel calls................................................................... 1,030 1,030 1,027
</TABLE>
- ------------------
(1) The Brownsville, Texas facility was sold on July 29, 1998. The statistics
above include the operations of the Brownsville facility through June 30,
1998.
N/M: Not meaningful
A majority of our revenues are generated by bunker and bulk product sales
which fluctuate with global oil prices. As a result, we experience volatility in
our revenue stream, which is not necessarily indicative of our profitability.
Gross profits from terminaling services are generally higher than gross
profits from bunker and bulk product sales. Our operating costs for terminaling
services are relatively fixed and generally do not change significantly with
changes in capacity leased. Additions or reductions in storage, throughput and
ancillary service revenues directly impact our operating income. Costs for the
procurement of bunker fuels and bulk petroleum products are variable and linked
to global oil prices. Our bunker and bulk product costs are also impacted by
market supply conditions, types of products sold and volumes delivered.
In addition, our operating costs are impacted by inflationary cost
increases, changes in storage capacity and changes in additional ancillary
services offered by us.
36
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of revenues represented by some items in our consolidated income statements.
RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1996 1997 1998
------------------- ------------------ ------------------
% OF % OF % OF
DOLLARS REVENUES DOLLARS REVENUES DOLLARS REVENUES
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Terminaling services................................... $ 49,812 31.9% $ 53,165 37.3% $ 66,625 48.7%
Bunker and bulk product sales.......................... 106,142 68.1% 89,334 62.7% 70,137 51.3%
-------- ------ -------- ------ -------- ------
Total revenues....................................... 155,954 100.0% 142,499 100.0% 136,762 100.0%
Cost of services and products sold..................... 142,718 91.5% 122,939 86.3% 106,688 78.0%
-------- ------ -------- ------ -------- ------
Gross profit......................................... 13,236 8.5% 19,560 13.7% 30,074 22.0%
Administrative expenses................................ 8,946 5.7% 7,735 5.4% 9,500 6.9%
-------- ------ -------- ------ -------- ------
Operating income..................................... 4,290 2.8% 11,825 8.3% 20,574 15.0%
Loss (gain) on dispositions of property and
equipment............................................ (68) -- (109) (0.1)% 1,652 1.2%
Interest expense....................................... 5,800 3.7% 16,874 11.8% 16,851 12.3%
Interest income........................................ 97 0.1% 555 0.4% 684 0.5%
-------- ------ -------- ------ -------- ------
Income (loss) before income taxes...................... (1,345) (0.8)% (4,385) (3.0)% 2,755 2.0%
Provision for income taxes............................. 761 0.5% 780 0.5% 320 0.2%
Preferred stock dividends.............................. 1,098 0.7% 3,196 2.2% 3,938 2.9%
-------- ------ -------- ------ -------- ------
Net income (loss) available to common stockholders... $ (3,204) (2.0)% $ (8,361) (5.7)% $ (1,503) (1.1)%
-------- ------ -------- ------ -------- ------
-------- ------ -------- ------ -------- ------
</TABLE>
The following tables set forth for the periods indicated (a) the total
revenues and total operating income (loss), after allocation of administrative
expenses, at each of our operating locations and (b) the percentage such revenue
and operating income (loss) relate to our total revenue and operating income.
You should note that we sold our Brownsville, Texas facility on July 29, 1998,
and the figures above and below and our consolidated financial statements
include the Brownsville facility through June 30, 1998.
REVENUES BY LOCATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1996 1997 1998
------------------- ------------------ ------------------
% OF % OF % OF
DOLLARS TOTAL DOLLARS TOTAL DOLLARS TOTAL
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean................. $139,751 89.6% $122,042 85.6% $114,091 83.4%
Canada................................................. 13,355 8.6% 18,586 13.0% 21,058 15.4%
Brownsville, Texas facility............................ 2,848 1.8% 1,871 1.4% 1,613 1.2%
-------- ------ -------- ------ -------- ------
Total................................................ $155,954 100.0% $142,499 100.0% $136,762 100.0%
-------- ------ -------- ------ -------- ------
-------- ------ -------- ------ -------- ------
</TABLE>
OPERATING INCOME (LOSS) BY LOCATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1997 1998
-------------------- ------------------ ------------------
% OF % OF % OF
DOLLARS TOTAL DOLLARS TOTAL DOLLARS TOTAL
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean................ $ 6,826 159.1 % $ 10,301 87.1 % $ 14,442 70.2 %
Canada................................................ (1,177) (27.4)% 3,539 29.9 % 6,625 32.2 %
Brownsville, Texas facility........................... (1,359) (31.7)% (2,015) (17.0)% (493) (2.4)%
--------- ------ -------- ------ -------- ------
Total............................................... $ 4,290 100.0 % $ 11,825 100.0 % $ 20,574 100.0 %
--------- ------ -------- ------ -------- ------
--------- ------ -------- ------ -------- ------
</TABLE>
37
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
Comparability
On July 29, 1998, we sold Statia Terminals Southwest to an unrelated
third-party. Our consolidated financial statements include the operations of
Statia Terminals Southwest through June 30, 1998. Therefore, the year ended
December 31, 1997 includes the operations of Statia Terminals Southwest for six
months more than the same period in 1998. Some pro forma information related to
the sale of Statia Terminals Southwest is presented in the unaudited pro forma
consolidated condensed financial statements included elsewhere in this
prospectus.
Revenues
Total revenues for the year ended December 31, 1998 were $136.8 million
compared to $142.5 million for the year ended December 31, 1997, a decrease of
$5.7 million, or 4.0%.
Revenues from terminaling services, which consist of storage, throughput,
dock charges, emergency response fees and other terminal charges, for the year
ended December 31, 1998 were $66.6 million compared to $53.2 million for the
previous year, an increase of $13.4 million, or 25.3%. The improvement in
terminaling services revenue for the year ended December 31, 1998 compared to
the previous year was principally due to:
o our ability to attract additional long term customers who use our
facilities as part of their strategic distribution networks;
o additional vessel calls at St. Eustatius resulting in higher dock charges
and emergency response fees; and
o the contango conditions in the international petroleum markets.
Revenues from terminaling services at St. Eustatius increased approximately
$8.7 million, or 24.2%, during the year ended December 31, 1998 as compared to
the year ended December 31, 1997. Total throughput increased from 62.9 million
barrels during the year ended December 31, 1997 to 74.2 million barrels during
the same period of 1998 due primarily to higher throughput of fuel oil and
petroleum products, and was partially offset by reduced throughput of crude oil.
Seventy-two more vessels called at the St. Eustatius facility during the year
ended December 31, 1998 than during the same period of 1997, resulting in higher
revenues from dock charges and stand-by emergency response fees. For the year
ended December 31, 1998, the overall percentage of capacity leased at this
facility was 92% compared to 76% for the same period of 1997, reflecting
increases in the percentage of capacity leased for fuel oil tankage and
petroleum products.
Revenues from terminaling services at Point Tupper increased $5.1 million,
or 32.6% during the year ended December 31, 1998 as compared to the year ended
December 31, 1997. The percentage of tank capacity leased at Point Tupper
increased from 70% for the year ended December 31, 1997 to 93% for the same
period of 1998. This increase was primarily the result of additional crude oil
and clean petroleum products tankage leased during the year ended December 31,
1998 as compared to the same period of 1997. Fewer vessel calls led to lower
port charge revenues at this facility during the year ended December 31, 1998 as
compared to the same period of 1997.
Revenues from bunker and bulk product sales were $70.1 million for the year
ended December 31, 1998 compared to $89.3 million for the same period in 1997, a
decrease of $19.2 million, or 21.5%. The decrease was primarily due to lower
comparative selling prices for bunker fuels reflecting current market
conditions. Average selling prices decreased 30.2% when comparing the year ended
December 31, 1998 with the same period of 1997. However, metric tons of bunkers
and bulk product sold increased 13.6% during the year ended December 31, 1998 as
compared to the same period of 1997.
Gross Profit
Gross profit for the year ended December 31, 1998 was $30.1 million
compared to $19.6 million for the same period of 1997, representing an increase
of $10.5 million, or 53.3%. The increase in gross profit is primarily the result
of the increased terminaling services revenue produced at a small incremental
cost. Additionally, we realized higher gross margins on bunker sales during the
year ended December 31, 1998 as compared to the same period of 1997 due to
higher volumes of bunker fuels delivered.
Administrative Expenses
Administrative expenses were $9.5 million for the year ended December 31,
1998 as compared to $7.7 million for the same period of 1997, representing an
increase of $1.8 million, or 22.8%. The increase during the year ended December
31, 1998, as compared to the same period of 1997, is primarily the result of
higher personnel costs and some professional fees.
Loss on Sale of Assets
As more fully discussed in note 15 of notes to the consolidated financial
statements, we recognized a loss on the sale of Statia Terminals Southwest
during the year ended December 31, 1998 of $1.7 million.
38
<PAGE>
Interest Expense
During the years ended December 31, 1997 and 1998, we incurred
$16.9 million of interest expense from interest accrued on our mortgage notes
due in 2003, amortization expense related to deferred financing costs and bank
charges.
Preferred Stock Dividends
Preferred stock dividends were $3.9 million for the year ended
December 31, 1998 as compared to $3.2 million for the same period of 1997,
representing an increase of $0.7 million, or 23.2%. Preferred stock dividends
have been computed and accrued but not paid on Statia Terminals Group's
Series A, B and C Preferred Stock. The increase during the year ended
December 31, 1998 as compared to the same period of 1997 is the result of the
increasing balance of dividends payable and a rate increase.
Net Loss
Net loss available to common stockholders was $1.5 million for the year
ended December 31, 1998 as compared to a net loss of $8.4 million for the same
period of 1997, an improvement of $6.9 million. The decrease in the net loss is
attributable to the net effect of the factors discussed above.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Comparability
Gross profit, operating income and net income (loss) for the years ended
December 31, 1997 and 1996 are not comparable due to the effects of purchase
accounting applied as a result of the Castle Harlan acquisition and the effects
of the acquisition of the First Salute assets, discussed in note 9 of notes to
the consolidated financial statements. Depreciation, amortization and other
operating expenses, which are components of gross profit, changed due to
revaluation of various assets to their fair values at the date of such
acquisition. Changes in components of our debt and equity accounts resulted in
changes to interest expense, dividends and costs of services and products sold.
Revenues
Total revenues for the year ended December 31, 1997 were $142.5 million
compared to $156.0 million for the year ended December 31, 1996, a decrease of
$13.5 million, or 8.6%.
Revenues from terminaling services for the year ended December 31, 1997
were $53.2 million compared to $49.8 million for the previous year, an increase
of $3.4 million, or 6.7%. Increased revenues from terminaling services at Point
Tupper were partially offset by lower revenues from terminaling services at
St. Eustatius.
Revenues from terminaling services at St. Eustatius decreased
$1.9 million, or 5.1%, during the year ended December 31, 1997 as compared to
the year ended December 31, 1996. Lower crude oil throughput and reductions in
the percentage of capacity leased for clean petroleum products resulted in lower
1997 revenues from storage, throughput and ancillary services. A customer
occupied all of the petroleum products storage for three-quarters of the 1996
year while the petroleum products tankage went essentially unleased for the 1997
year.
Revenues from terminaling services at Point Tupper increased $6.6 million,
or 73.1% during the year ended December 31, 1997 as compared to the year ended
December 31, 1996. Incremental spot storage leases for crude oil from our
primary Canadian customer, Tosco, crude oil and petroleum products leases from
several new customers, plus 30 million barrels, or 127%, of increased throughput
from 1996 and additional ancillary services, contributed to the higher revenues
from terminaling services. Additionally, some unleased tankage was converted
from petroleum product storage to crude oil storage to meet customer demand.
Revenues from bunker and bulk product sales fell $16.8 million, or 15.8%,
to $89.3 million for the year ended December 31, 1997 from $106.1 million for
the same period in 1996. The drop is primarily attributable to increased
competition from elsewhere in the Caribbean, the U.S. Gulf coast and other ports
resulting in lower volumes of bunker fuel delivered and fewer bulk product
sales. At St. Eustatius, the volume of bunker fuels delivered fell 12.9%.
Comparative average selling prices year-to-year were virtually unchanged. At
Point Tupper, we were unable to expand our bunker sales business initiated in
1996 due to our inability to find an adequate source of supply.
Our Brownsville, Texas facility, which we sold on July 29, 1998,
experienced a reduction in total revenues due to the loss of storage business
for gasoline and diesel fuels and vegetable oils primarily to competing
facilities in the region. Statia Terminal Southwest's revenues were
$1.9 million for the year ended December 31, 1997, down $0.9 million or 28.3%,
from $2.8 million for the same period in 1996.
Gross Profit
Gross profit for the year ended December 31, 1997 was $19.6 million
compared to $13.2 million for the year ended December 31, 1996 representing an
increase of $6.4 million, or 48.5%. During the period from January 1, 1996
through November 27,
39
<PAGE>
1996, lease expenses related to First Salute of $5.6 million consisting
primarily of interest were included in cost of services and products sold. This
lease was fully satisfied in connection with the Castle Harlan acquisition.
Additionally, the increased terminaling services revenue positively impacted our
gross profit.
Administrative Expenses
Administrative expenses were $7.7 million for the year ended December 31,
1997 as compared to $8.9 million for the year ended December 31, 1996,
representing a decrease of $1.2 million, or 13.5%. For the year ended
December 31, 1996, administrative expenses included $3.0 million of non-cash
stock based compensation awarded to some of our managers in connection with the
Praxair and Castle Harlan acquisitions. Exclusive of the non-recurring stock
based compensation, selling and administrative expenses increased from year-to-
year primarily due to higher personnel costs.
Interest Expense
Since the Castle Harlan acquisition in November 1996, our interest expense
has related to interest accrued on our mortgage notes due 2003, amortization
expense related to deferred financing costs and bank charges. For the year ended
December 31, 1997, interest expense amounted to $16.9 million. For the year
ended December 31, 1996, interest expense was $5.8 million which included
expenses related to:
o the mortgage notes due 2003,
o third party debt obligation, net of amounts charged to capital projects,
o the effects of an interest rate swap,
o amortization expense related to deferred financing costs, and
o bank charges.
Preferred Stock Dividends
Preferred stock dividends were $3.2 million for the year ended
December 31, 1997 as compared to $1.1 million for the year ended December 31,
1996. Preferred stock dividends subsequent to November 27, 1996 represent
amounts accrued but not paid on Statia Terminals Group's Series A, B and C
Preferred Stock and related dividend payable balances. Preferred stock dividends
for the year ended December 31, 1996 are not comparable to those incurred for
the year ended December 31, 1997 due to changes in Statia Terminals Group's
capital structure resulting from the Praxair and Castle Harlan acquisitions.
Net Loss
Net loss available to common stockholders was $8.4 million for the year
ended December 31, 1997 as compared to $3.2 million for the year ended
December 31, 1996, representing an increase of $5.2 million. The increase in the
net loss is attributable to the net effect of the factors discussed above.
SELECTED QUARTERLY FINANCIAL INFORMATION
Our 1998 operating income and EBITDA increased quarter over quarter in 1998
and for each quarter of 1998 compared to the same quarters in 1997, except for
the second quarter of 1998, when we took a non-cash charge of $4 million from
the loss on a sale of property. This trend is a result of our entering into
additional long term contracts over the two-year period resulting in higher
capacity leased, increased volumes of bunker fuel delivered due, in part, to
reduced competition, and additional revenues from ancillary services due to
higher terminal activity.
The following table sets forth selected unaudited quarterly operating
results for each of our last eight quarters. This information was prepared by us
on a basis consistent with our audited financial statements and includes all
adjustments, consisting of normal and recurring adjustments, that we consider
necessary for a fair presentation of the data. During the second quarter of
1998, we recorded a non-cash charge of $4 million from the loss on a sale of
property, of which $2.3 million was reversed during the fourth quarter. These
quarterly results are not necessarily indicative of future results of
operations. This information should be read in conjunction with our consolidated
financial statements and notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
QUARTERS ENDED TOTAL
------------------------------------------------------- --------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
--------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
1997
Total revenues.................................. $32,709 $33,148 $35,333 $ 41,309 $142,499
Operating income................................ 2,394 2,508 2,439 4,484 11,825
EBITDA.......................................... 4,986 5,115 4,896 7,492 22,489
1998
Total revenues.................................. $30,364 $36,472 $32,699 $ 37,227 $136,762
Operating income................................ 2,999 5,231 5,635 6,709 20,574
EBITDA.......................................... 5,804 4,082 8,373 11,857 30,116
</TABLE>
40
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES--SUBSEQUENT TO THE CASTLE HARLAN ACQUISITION
Cash Flow from Operating Activities
Net cash provided by operating activities was $18.2 million and
$9.8 million for the years ended December 31, 1998 and 1997 and $2.2 million for
the period from November 27, 1996 through December 31, 1996, respectively. Cash
flow from operations has been our primary source of liquidity during the periods
subsequent to the Castle Harlan acquisition. Differences between net losses and
positive operating cash flow have resulted primarily from depreciation and
amortization burdens and changes in various asset and liability accounts.
Additionally, during the year ended December 31, 1998, we recognized a
$1.7 million non-cash loss on the sale of Statia Terminals Southwest. See
note 15 of notes to consolidated financial statements for more information on
the sale of Statia Terminals Southwest.
At December 31, 1997, we had cash and cash equivalents on hand of
$6.1 million compared to $14.1 million at December 31, 1998.
Cash Flow from Investing Activities
Net cash used in investing activities was $4.1 million and $12.9 million
for the years ended December 31, 1998 and 1997 and $178.0 million for the period
from November 27, 1996 through December 31, 1996, respectively. Investing
activities during 1998 and 1997 and the period ended December 31, 1996 included
purchases of property and equipment of $10.7 million, $5.3 million and
$1.2 million, respectively. Additionally, as more fully discussed in note 15 of
notes to consolidated financial statements, on July 29, 1998, we received
$6.5 million of cash proceeds from the sale of our Brownsville, Texas facility.
During the year ended December 31, 1997 and the period ended December 31,
1996, we spent $7.7 million and $176.8 million, respectively, related to the
Castle Harlan acquisition. These amounts include:
o approximately $175.1 million in cash paid to Praxair, of which
$170.0 million was paid at closing and $5.1 million was paid in February
1997, to satisfy the cash portion of the purchase price, and
o $9.4 million of commissions, fees and expenses.
Cash Flow from Financing Activities
During the year ended December 31, 1998 we utilized the net proceeds from
the sale of the Brownsville, Texas facility to retire $6.15 million of Statia
Terminals Group's Series D Preferred Stock.
As part of the Castle Harlan acquisition, we issued $135.0 million of
mortgage notes, received proceeds of $56.5 million from the issuance of
preferred and common stock and paid $6.4 million of debt costs. The net cash
proceeds from these transactions were substantially used as described above in
"--Cash Flow from Investing Activities".
In connection with the Castle Harlan acquisition prior to November 27, 1996
all of our third-party indebtedness, including an off-balance sheet lease
obligation, bank debts, preferred stock from a former affiliate and advances
from Praxair, was repaid. In addition, on November 27, 1996, we entered into a
new $17.5 million revolving credit facility secured by our accounts receivable
and oil inventory. The revolving credit facility is available for working
capital needs and letter of credit financing, and it permits us to borrow in
accordance with our available borrowing base which was estimated at
$8.0 million as of December 31, 1998 and at March 31, 1999. No draws on the
revolving credit facility have occurred. The revolving credit facility bears
interest at the prime rate plus 0.50% per annum (8.25% at December 31, 1998) and
will expire on November 27, 1999.
The debt service costs associated with the borrowings under the mortgage
notes have significantly increased liquidity requirements. The mortgage notes
accrue interest at 11 3/4% per annum payable semi-annually on May 15 and
November 15. The mortgage notes will mature on November 15, 2003. The mortgage
notes are redeemable in whole or in part at the option of Statia Terminals
International at any time on or after November 15, 2000 at redemption prices set
forth in the indenture relating to the mortgage notes. The mortgage notes may be
redeemed or purchased prior to November 15, 2000 in specific circumstances as
defined in the indenture relating to the mortgage notes.
The indenture generally limits the incurrence of additional debt by Statia
Terminals International, limits the ability of Statia Terminals International to
pay Statia Terminals Group dividends or make any other distribution to Statia
Terminals Group, and limits the ability of Statia Terminals International to
sell its assets. We may incur additional indebtedness as long as our fixed
charge coverage ratio is greater than 2.0 to 1. The fixed charge coverage ratio
is the ratio of adjusted EBITDA to fixed charges, each computed as set forth in
the indenture with respect to the mortgage notes. The indenture requires EBITDA
for Statia Terminals International to be adjusted for specified non-cash income
and expense items to compute adjusted EBITDA. Adjusted EBITDA for Statia
Terminals
41
<PAGE>
International also excludes administrative expenses and the Castle Harlan
management fee incurred by Statia Terminals Group. Under the terms of the
indenture, Statia Terminals International may not pay Statia Terminals Group any
dividend if at the time of declaration:
o a default or event of default under the indenture shall have occurred and
be continuing or shall occur as a consequence thereof;
o Statia Terminals International's consolidated fixed charge coverage ratio
(as defined in the indenture) for the prior four full quarters is less
than 2.0 to 1; or
o the amount of such dividend, when added to the aggregate amount of all
other dividends and specific other restricted payments made by Statia
Terminals International after November 27, 1996 and not covered by other
exceptions in the indenture, exceeds the following sum:
o 50% of Statia Terminals International's consolidated net income, as
defined in the indenture and taken as one accounting period, from
November 27, 1996 to the end of Statia Terminals International's
most recently ended fiscal quarter for which internal financial
statements are available at the time of such dividend or, if such
aggregate consolidated net income is a deficit, minus 100% of such
aggregate deficit,
plus
o the net cash proceeds from the issuance and sale after November 27,
1996 of Statia Terminals International capital stock
o excluding any issuance or sale to a subsidiary of Statia Terminals
International.
Some other dividends, generally unrelated to operating cash flow, are permitted
notwithstanding the second and third items above.
We believe that cash flow generated by operations and amounts available
under the revolving credit facility will be sufficient, until the maturity of
the mortgage notes, to fund working capital needs, capital expenditures and
other operating requirements, including any expenditures required by applicable
environmental laws and regulations, and to service debt. Our operating
performance and ability to service or refinance the mortgage notes and to extend
or refinance the revolving credit facility will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond our control. We can give no assurances that our future operating
performance will be sufficient to service our indebtedness or that we will be
able to repay at maturity or refinance our indebtedness in whole or in part.
LIQUIDITY AND CAPITAL RESOURCES--PRIOR TO THE CASTLE HARLAN ACQUISITION
Except for cash of our Canadian subsidiaries, prior to the Castle Harlan
acquisition we were a participant in Praxair/CBI Industries' cash management
system, which swept all cash receipts into our predecessor company's investment
program. Cash for operations and capital expansion was funded by our operations,
our predecessor company's operations and debt facilities available to us, which
were guaranteed by our predecessor company. During 1996, prior to the Castle
Harlan acquisition, cash provided by operations of $9.1 million, proceeds from
insurance claims related to hurricane damage incurred in 1995 of $12.6 million
and net advances from Praxair of approximately $19.3 million, exclusive of
advances related to repayment of existing indebtedness, were used to finance the
purchase of property and equipment of $14.5 million and pay dividends to Praxair
and its affiliates of $25.8 million.
CAPITAL EXPENDITURES
We spent $15.7 million, $5.3 million and $10.7 million during the years
ended December 31, 1996, 1997 and 1998, respectively. These amounts include
$1.6 million, $0.9 million and $1.7 million, respectively, which was spent to
enhance our ability to generate incremental revenues. Capital expenditures for
1996 were primarily for improvements made in connection with hurricane damage
incurred in 1995. During 1997, capital expenditures were made primarily for
various piping and tank enhancements at each location and a new warehouse at St.
Eustatius. During 1998, a majority of capital expenditures were related to
maintenance capital expenditures including our terminal and marine maintenance
programs.
Our preliminary capital expenditure budget for 1999 is $7.0 million for
maintenance capital expenditures and $2.1 million for producing incremental
revenues. Additional spending is contingent upon the addition of incremental
terminaling business.
The following table sets forth capital expenditures by location and
separates such expenditures into those which produce, or have the potential to
produce, incremental revenue, and those which represent maintenance capital
expenditures.
42
<PAGE>
SUMMARY OF CAPITAL EXPENDITURES BY LOCATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRODUCE MAINTENANCE
INCREMENTAL CAPITAL
REVENUES EXPENDITURES TOTAL % OF TOTAL
----------- ------------- -------- ----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Netherlands Antilles................................ $89,344(1) $11,969(2) $101,313(1)(2) 97.2%
Canada.............................................. 751 451 1,202 1.2%
Brownsville, Texas (3).............................. 19 1,226 1,245 1.2%
All other United States............................. -- 444 444 0.4%
------- ------- -------- ------
Total............................................ $90,114 $14,090 $104,204 100.0%
------- ------- -------- ------
------- ------- -------- ------
YEAR ENDED DECEMBER 31, 1997
Netherlands Antilles................................ $ 696 $ 2,858 $ 3,556 66.5%
Canada.............................................. 120 834 954 17.9%
Brownsville, Texas (3).............................. 125 100 225 4.2%
All other United States............................. -- 609(4) 609 11.4%
------- ------- -------- ------
Total............................................ $ 941 $ 4,401 $ 5,344 100.0%
------- ------- -------- ------
------- ------- -------- ------
YEAR ENDED DECEMBER 31, 1998
Netherlands Antilles................................ $ 667 $ 5,990 $ 6,657 62.1%
Canada.............................................. 829 476 1,305 12.2%
Brownsville, Texas (3).............................. 218 94 312 2.9%
All other United States............................. -- 2,440(4) 2,440 22.8%
------- ------- -------- ------
Total............................................ $ 1,714 $ 9,000 $ 10,714 100.0%
------- ------- -------- ------
------- ------- -------- ------
</TABLE>
(1) Includes purchase of First Salute assets.
(2) Includes $6.8 million of capitalized enhancements related to the hurricanes
of 1995.
(3) We sold our Brownsville, Texas facility on July 29, 1998.
(4) Includes expenditures for U.S. flagged marine equipment utilized primarily
in the Netherlands Antilles.
Prior to 1996, we financed the construction of additional crude oil
terminaling assets at St. Eustatius through a leveraged lease arrangement,
effectively removing $88.5 million of assets and liabilities from our balance
sheet. For a discussion of the leveraged lease arrangement, see note 9 to the
consolidated financial statements. We leased land to a special purpose financing
entity, First Salute, upon which the crude tanks were constructed. These crude
oil facilities at St. Eustatius were leased back to us. During the life of the
lease, we accounted for monthly lease payments, consisting primarily of interest
on the underlying financing, and recognized an accrual towards the residual
guarantee value within the line item cost of services and products sold. During
1996, we paid $5.6 million to First Salute which consisted primarily of interest
costs on the underlying debt. All obligations under the lease were satisfied
prior to the Castle Harlan acquisition and the related assets were included on
the balance sheet at that time.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
We are subject to comprehensive and periodically changing environmental,
health and safety laws and regulations within the jurisdictions of our
operations, including those governing oil spills, emissions of air pollutants,
discharges of wastewater and storm waters, and the disposal of non-hazardous and
hazardous waste. In 1996, 1997, and 1998, our capital expenditures for
compliance with environmental, health and safety laws and regulations were
approximately $1.3 million, $1.3 million and $2.7 million, respectively. These
figures do not include routine operational compliance costs, such as the costs
for the disposal of hazardous and non-hazardous solid waste, which were
approximately $0.4 million, $0.2 million and $0.9 million in 1996, 1997 and
1998, respectively. We believe we are presently in substantial compliance with
applicable laws and regulations governing environmental, health and safety
matters. The Praxair agreement includes a covenant by Praxair to pay some
environmental investigation,
43
<PAGE>
remediation and upgrade costs. With respect to seven identified items of
environmental investigation and remediation, this covenant is subject to dollar
limitations aggregating $4.2 million. With respect to all other costs covered by
the Praxair covenant there are no dollar limitations. However, we cannot
guarantee that Praxair will pay all of the indemnified amounts without dispute
or delay.
Past uses of the Point Tupper facility, including its past operation by
others as an oil refinery, have resulted in particular on-site areas of known
and potential contamination, as described below. Under Canadian environmental,
health and safety laws, we, as the owner and operator of the facility, can be
held liable for mitigation or remediation of, and damages arising from, these or
other as yet unknown environmental, health and safety conditions at the
facility.
In connection with the Castle Harlan acquisition in 1996, phase I and
limited phase II environmental site assessments were conducted at the Point
Tupper terminal to identify potential environmental, health and safety matters.
Particular environmental matters and conditions that were likely to require the
incurrence of costs were identified and Praxair agreed to pay the costs of
addressing certain of such matters, subject in some cases to monetary
limitations. Since then we have been undertaking, in accordance with
environmental, health and safety laws, investigations, remediation and upgrading
to address these and other more recently identified matters.
Some of these matters involve environmental contamination associated with
particular areas of the property, some of which result from the past operation
of the facility by others as a refinery. These include a former sludge and waste
disposal area, with respect to which a remediation plan is being developed and
two pump stations, with respect to which further delineation and remediation of
contaminated soil are underway. Another contaminated area includes the area
surrounding an above-ground crude oil storage tank, the investigation and
delineation of which is at an early stage, although the contamination appears to
be contained within a fairly limited area.
Particular terminal facilities have also been identified as requiring
upgrading or remediation to meet the requirements of existing environmental,
health and safety laws. These include, among other matters, an oil-water
separator required to process facility run-off and to treat ballast water, with
respect to which the rebuilding of the separator is expected to be completed in
1999, a ballast reception line has been installed, and petroleum contamination
discovered beneath the separator is being addressed, and the upgrading of
containment areas for above-ground storage tanks, with respect to which survey
work has been completed and civil work is expected to commence during 1999.
Upgrading and remediation work also includes the removal of underground storage
tanks, with respect to which the removal has been completed and the remediation
of associated contaminated soil is underway, and the removal of friable asbestos
from particular areas of the terminal, the removal and disposal of substantially
all of which has been completed and we are awaiting final inspection and the
issuance of a certificate of compliance.
With respect to the foregoing environmental liabilities and costs, Praxair,
in connection with the Castle Harlan acquisition, to date has paid approximately
$2.3 million. We anticipate incurring additional costs of $0.7 million which are
not likely to be reimbursable from Praxair. Based on the investigation conducted
and information available to date, the potential cost of additional remediation
and compliance related to the foregoing matters is currently estimated to be
approximately $10 million. Praxair is required under the Praxair agreement to
pay the costs of this additional remediation and compliance, and has not
disputed this obligation. However, Praxair has questioned whether some of the
methods included in the $10 million estimate are the most cost effective and
whether some of the remediation included in such estimate is necessary.
We have also identified environmental, health and safety costs that are not
covered by the Praxair agreement, including the $0.7 million discussed above,
for which we accrued $1.5 million during 1996, $10,000 of which has been spent
through the end of 1998. We can give no assurances that such accrual is
sufficient to cover all such environmental, health and safety costs.
We can give no assurances that additional liabilities, either presently
known or discovered in the future, under existing or future environmental,
health and safety laws and outside the scope of the Praxair agreement will not
be material. In addition, we can give no assurances that we will not have to
incur material expenses before Praxair pays
44
<PAGE>
amounts for which Praxair ultimately would be responsible.
We anticipate that we will incur additional capital and operating costs in
the future to comply with currently existing laws and regulations, amendments to
such laws and regulations, new regulatory requirements arising from recently
enacted statutes, and possibly new statutory enactments. As government
regulatory agencies have not yet promulgated the final standards for proposed
environmental, health and safety programs, we cannot at this time reasonably
estimate the cost for compliance with these additional requirements, some of
which will not take effect for several years, or the timing of any such costs.
However, we believe any such costs will not have a material adverse effect on
our business and financial condition or results of operations.
INFORMATION TECHNOLOGY AND THE YEAR 2000
Some computer software and hardware applications and embedded
microprocessor, microcontroller or other processing technology applications and
systems use only two digits to refer to a year rather than four digits. As a
result, these applications could fail or create erroneous results in dealing
with particular dates and especially if the applications recognize "00" as the
year 1900 rather than the year 2000. During 1997, we developed a Year 2000 plan
to upgrade our key information systems and simultaneously address the potential
disruption to both operating and accounting systems that might be caused by the
Year 2000 problem. The Year 2000 plan also provides for the evaluations of the
systems of customers, vendors, and other third-party service providers and
evaluations of our non-information technology systems, which include embedded
technologies such as microcontrollers and is also referred to as non-traditional
information technology.
We have substantially completed the assessment phase of the Year 2000 plan
as it relates to both traditional and non-traditional technology applications
and systems. We are currently in the process of testing new Year 2000 compliant
terminal operations software at our facilities. We anticipate that the Year 2000
compliant terminal operations systems will be fully implemented in the first
quarter of 1999. We recently selected a fully integrated Year 2000 compliant
finance, accounting, and human resources system and expect to have the new
system fully operational by the third quarter of 1999.
We have identified some components of our control systems at our two
terminals as not being Year 2000 compliant. These systems measure, regulate,
control and maintain crude oil and petroleum product flow and fire protection
equipment at the terminals. We are currently evaluating the best means to
mitigate the possible adverse effects resulting from the potential failure of
these systems including repair or replacement and, in some cases, have already
initiated replacement of non-compliant components. However, we believe that in a
worst case scenario, existing manual overrides would prevent the failure of
these systems from having a material adverse effect on our operations.
In accordance with our Year 2000 plan, we have initiated a formal
communications process with other companies with which our systems interface or
rely on to determine the extent to which those companies are addressing their
Year 2000 compliance. In connection with this process, we have sent numerous
letters and questionnaires to third parties and are evaluating those responses
as they are received. Where necessary, we will be working with those companies
that are not yet Year 2000 compliant to mitigate any material adverse effect
such non-compliance may have on us. Based upon information we have received and
reviewed of our possible existing relationships with third parties, we do not
currently anticipate that any third-party non-compliance would have a material
adverse effect on our business, results of operations, or financial condition.
In 1998, we spent $1.1 million related to our Year 2000 remediation efforts
of which we have capitalized $1.0 million and expensed $0.1 million. In 1999, we
anticipate spending an additional $0.8 million to complete these efforts of
which we anticipate capitalizing $0.7 million and expensing $0.1 million.
However, we cannot guarantee that these estimates will be met and actual
expenditures could differ materially from these estimates.
Based upon information currently available to us, we believe our efforts
will succeed in preventing the Year 2000 issue from having a material adverse
effect on us. However, the pervasive nature of the Year 2000 issue may prevent
us from fully assessing and rectifying all
45
<PAGE>
systems that could have an effect on our business, results of operations, or
financial condition.
POLITICAL, INFLATION, CURRENCY AND INTEREST RATE RISKS
We periodically evaluate the political stability and economic environment
in the countries in which we operate. As a result of these evaluations, we are
not presently aware of any matters that may adversely impact our business,
results of operations or financial condition. The general rate of inflation in
the countries where we operate has been relatively low in recent years causing a
modest impact on operating costs. Typically, inflationary cost increases result
in adjustments to storage and throughput charges because long term contracts
generally contain price escalation provisions. Bunker fuel and bulk product
sales prices are based on active markets, and we are generally able to pass any
cost increases to customers. Except for minor local operating expenses in
Canadian dollars and Netherlands Antilles guilders, all of our transactions are
in U.S. dollars. Therefore, we believe we are not significantly exposed to
exchange rate fluctuations.
As all of our present debt obligations carry a fixed rate of interest,
except for the undrawn revolving credit facility which varies with changes in
the lender's prime lending rate, we believe our exposure to interest rate
fluctuations is minimal.
TAX MATTERS
Our St. Eustatius facility has qualified for designation as a free trade
zone and our Point Tupper facility has qualified for designation as a customs
bonded warehouse. Such status allows customers and us to transship commodities
to other destinations with minimal Netherlands Antilles or Canadian tax effects.
Pursuant to a Free Zone and Profit Tax Agreement with the island government
of St. Eustatius which is scheduled to expire on December 31, 2000, we are
subject to a minimum annual tax of 500,000 Netherlands Antilles guilders or
approximately $282,000. This agreement further provides that any amounts paid to
meet the minimum annual payment will be available to offset future tax
liabilities under such agreement to the extent that the minimum annual payment
is greater than 2% of taxable income. Discussions regarding modification and
extension of this agreement are in progress, and we believe that, although some
terms and conditions could be modified and that the amounts payable to these
governments may be increased, extension of this agreement is likely. However, it
is possible that such amounts may be increased more than anticipated and that
government authorities may impose additional fees if this agreement is not
extended or is otherwise amended.
Tax rates in the jurisdictions in which we operate did not change
significantly between 1996 and 1998 other than the enactment of a Nova Scotia
provincial capital tax effective April 1, 1997. This capital tax is immaterial
to our overall results and financial position.
Particular income tax liabilities incurred prior to November 27, 1996 were
assumed by Praxair, and we retained net operating loss carryforwards of
$7.5 million in Canada. We also retained investment tax credits in the
Netherlands Antilles and Canada, which may be used to offset future taxes
payable. As a result of the Castle Harlan acquisition, particular Canadian
assets were revalued for tax purposes resulting in a loss of $77.2 million
during 1996.
The combined net operating loss and investment tax credit carryforward
available to offset Canadian taxable income was $62.4 million as of
December 31, 1998 which expires in varying amounts through 2005. We have
provided a full valuation allowance against these deferred tax assets because it
is not certain that any deferred tax assets will be utilized in the future.
LEGAL PROCEEDINGS
Global Petroleum Corp. and one of its affiliates sued us in December of
1993 seeking the release of petroleum products we were holding to secure the
payment of invoices. The Supreme Court of Nova Scotia ordered the release of the
products once Global posted a $2.0 million bond. Global claimed damages of
$1.2 million for breach of contract, and we counterclaimed for breach of
contract and payment of approximately $2.0 million of overdue invoices. In April
1996, Global, Scotia Synfuels Limited and their related companies sued CBI
Industries and us in the Supreme Court of Nova Scotia alleging $100 million in
damages resulting from misrepresentation, fraud and breach of fiduciary duty.
The plaintiffs allege these claims arose out of the level of costs and expenses
paid to subsidiaries of CBI Industries and others for the reactivation of the
Point Tupper facility and the
46
<PAGE>
subsequent sale of the plaintiff's diluted shares in the entity owning the Point
Tupper facility to one of our affiliates, which was at that time a subsidiary of
CBI Industries. These proceedings are currently in the discovery phase.
In May 1994, the U.S. Department of Justice sued two of our subsidiaries
for $3.6 million of pollution clean-up costs in connection with the discharge of
oil into the territorial waters of the U.S. Virgin Islands and Puerto Rico by a
barge that had been loaded by one of our subsidiaries at St. Eustatius but was
not affiliated with us. On April 16, 1998, the U.S. District Court ruled that it
lacked jurisdiction over such subsidiary and dismissed it from the case.
We believe the allegations made in these proceedings are factually
inaccurate and intend to vigorously contest these claims. In connection with the
Castle Harlan acquisition, Praxair agreed to indemnify us against damages
relating to the proceedings described above. While we can not estimate any
ultimate liability or guaranty that Praxair will pay all of the indemnified
damages without dispute or delay, we believe these proceedings will not
materially affect our business and financial condition, results of operations or
ability to make the target quarterly distribution.
We are involved in various other claims and litigation related to the
ordinary conduct of our business. Based upon our analysis of legal matters and
our discussions with legal counsel, we believe that these matters will not
materially impact our business and financial condition, results of operations or
ability to make the target quarterly distribution.
INSURANCE
We maintain insurance policies on insurable risks at levels we consider
appropriate. At the present time, we do not carry business interruption
insurance due to, what we believe, are excessive premium costs for the coverage
provided. However, we do carry business interruption insurance for our offshore
single point mooring system. While we believe we are adequately insured, future
losses could exceed insurance policy limits, or under adverse interpretations,
be excluded from coverage. Future liability or costs, if any, incurred under
such circumstances could adversely impact cash flow.
ACCOUNTING STANDARDS AND POLICIES
In 1998, we adopted Statement of Financial Accounting Standards ("SFAS")
No. 128--"Earnings Per Share." Pro forma diluted earnings per common and
subordinated share and incentive right calculations are determined by dividing
net income by the weighted average number of common and subordinated shares and
incentive rights outstanding. SFAS No. 128 had no impact on our reported
earnings per share.
In 1998, we adopted SFAS No. 130--"Reporting Comprehensive Income" which
establishes standards for the reporting and display of comprehensive income and
its components. There were no material differences between net income and
comprehensive income.
In 1998, we adopted SFAS No. 131--"Disclosures about Segments of an
Enterprise and Related Information" which establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
product and service, geographic areas, and major customers. The adoption of SFAS
No. 131 had no impact on results of operations, financial position or cash flow.
In June 1998, the FASB issued SFAS No. 133--"Accounting for Derivative
Instruments and Hedging Activities" which establishes standards of accounting
for derivative instruments including specific hedge accounting criteria. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999 although
earlier adoption is allowed. We have not yet quantified the impacts of adopting
SFAS No. 133 and have not determined when we will adopt SFAS No. 133. However,
as we do not presently have derivative instruments, we do not expect SFAS
No. 133 to have a material impact on us.
OTHER MATTERS
We have reclassified our emergency spill response vessel M/V Statia
Responder (formerly known as the M/V Megan D. Gambarella) from its original
asset held for sale classification to property and equipment as we are no longer
actively seeking buyers for the vessel. Some of Statia Terminals
47
<PAGE>
Group's preferred stock agreements required it to utilize any net proceeds from
the sale of the vessel to redeem Series B Preferred Stock at the applicable
redemption price prior to November 28, 1998. As the Series B Preferred Stock was
not redeemed by Statia Terminals Group prior to November 28, 1998, the dividend
rates on Statia Terminals Group's Series A, B and C Preferred Stock increased
from 8% to 14.75% effective November 28, 1998, in accordance with its preferred
stock agreements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We periodically purchase refined petroleum products from our customers and
others for resale as bunker fuel, for small volume sales to commercial interests
and to maintain an inventory of blend stocks for our customers. Petroleum
product inventories are held for short periods, generally not exceeding ninety
days. We do not presently have any derivative positions to hedge our inventory
of petroleum products. The following table indicates the aggregate carrying
value of our petroleum products on hand at December 31, 1998 computed at average
costs, net of any lower of cost or market valuation provisions, and the
estimated fair value of such products.
ON BALANCE SHEET COMMODITY POSITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-----------------------------
CARRYING AMOUNT FAIR VALUE
--------------- ----------
<S> <C> <C>
Petroleum inventory:
Statia Terminals N.V. ............................................................ $ 4,205 $4,205
Statia Terminals Canada........................................................... 323 338
------- ------
Total............................................................................... $ 4,528 $4,543
------- ------
------- ------
</TABLE>
48
<PAGE>
INDUSTRY
TERMINALING
The petroleum terminaling industry consists of two market segments. One
segment is characterized by the ownership and management of terminals inland
along major crude oil or petroleum product pipelines. This segment is primarily
engaged in the distribution of crude oil to inland refineries or of petroleum
products via pipeline, rail or truck. The second segment of the industry is
marine terminaling. This segment is primarily engaged in bulk storage and
transshipment of crude oil and petroleum products of domestic and overseas
producers, integrated oil companies, traders, refiners and distributors.
"Transshipment" is the process whereby customers transfer their products either
from a vessel to storage tanks for subsequent transfer to other vessels for
delivery to other destinations or from one ship to another ship across the dock.
We are engaged only in marine terminaling.
Demand for terminaling services depends on the supply of and demand for
crude oil and petroleum products in the U.S. The U.S. Department of Energy
reports that U.S. demand for crude oil and petroleum products increased at an
annual compound growth rate of 1.8% between 1993 and 1998. According to U.S.
Department of Energy statistics, while demand in the U.S. has risen, domestic
crude oil production has fallen at an annual compound percentage rate of 1.3%
between 1993 and 1998 resulting in an increase in crude oil and petroleum
product imports at an annual compounded rate of 3.4% over the same period. In
addition, the U.S. Department of Energy reports that average U.S. refinery
utilization was at 92% in 1993 and 96% in 1998.
The U.S. Department of Energy projects that the import requirements of
crude oil and refined petroleum products into the U.S. will increase at an
annual compounded rate of 4.3% from 1998 through 2003.
A substantial portion of crude oil and petroleum products storage terminals
are "captive," i.e., they are owned by producers, refiners and pipeline
operators and used almost exclusively for their own operations. The independent
terminaling operator segment of the marine terminaling industry which is
described in this prospectus excludes these captive terminals. Captive terminal
storage is only occasionally made available to the general market and lacks
competitive advantages of independent operations, the most important of which is
confidentiality.
The Independent Liquid Terminals Association is an international trade
association that represents commercial operators of bulk liquid terminals,
above-ground tank storage facilities, and pipeline facilities located in North
and South America, Europe, Asia, the United Kingdom, Australia, New Zealand and
South Africa. As published in the 1997 ILTA Bulk Liquids Terminals Directory,
the 86 ILTA member companies operated 483 deepwater barge and pipeline terminals
with an aggregate capacity of over 327 million barrels of dry bulk and liquid
storage capacity in more than 13,720 tanks. More than 400 of these bulk liquid
terminals are located in the U.S. and represent over 277 million barrels of
capacity.
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U.S. CRUDE OIL AND PETROLEUM PRODUCT IMPORTS
[CHART]
(In million barrels per day)
1993 8.62
1994 8.99
1995 8.84
1996 9.48
1997 10.16
1998(1) 10.20
Source: U.S. Department of Energy
(1) This is a projected number.
Companies generally use marine liquids terminals for various reasons
including:
o to take advantage of economies of scale by transporting crude oil or
petroleum products in bulk to a terminal as near to the ultimate
destination as possible;
o to blend crude oil or petroleum products to meet market specifications;
o to process products stored by their customers to add value for a specific
downstream market;
o to store crude oil or petroleum product temporarily; and
o to access fuel, in a process known as "bunkering", and supplies for
consumption by marine vessels.
BULK CARGO MOVEMENT
Due to significant economies of scale, petroleum companies ship crude oil
from the Middle East, North Sea and West Africa in very-large or ultra-large
crude carriers to a transshipment point such as one of our terminals. These
very-large and ultra-large crude carriers, however, are too large to deliver
their cargo directly to many ports, including virtually all U.S. ports.
Therefore, most petroleum companies are forced to either partially or completely
"lighter" their cargo, which is the process by which liquid cargo is transferred
to smaller vessels, usually while at sea, or transship their cargo through a
terminal to other smaller vessels that can enter U.S., Canadian and Caribbean
ports. Both of our facilities can handle substantially all of the world's
largest fully-laden very-large and ultra-large crude carriers.
We believe that terminaling offers several advantages over lightering.
Terminaling generally provides more flexibility in the scheduling of deliveries
and allows our customers to deliver their products to multiple locations.
Terminaling is also generally safer and more environmentally sound than
lightering which is conducted at sea and may be impacted by vessel movement,
adverse weather and sea conditions. Lightering in U.S. territorial waters also
creates a risk of liability for owners and shippers of oil. Under the U.S. Oil
Pollution Act of 1990 and other state and federal legislation, significant
liability is imposed for spills in U.S. territorial waters. In Canada, similar
liability exists under the Canadian Shipping Act. Terminaling also provides
customers with the ability to access value added terminal services.
Lightering generally takes significantly longer than discharging at a
terminal. For example, a fully laden ultra-large crude carrier may require up to
seven days to fully discharge by lightering, but only 24 to 48 hours to fully
discharge at our
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terminals. In addition, terminals allow oil producers to store oil and benefit
from value-added services. The advantages of terminaling may be offset in market
conditions where the direct costs of terminaling are higher than those of
lightering. The direct cost differential of lightering versus terminaling
changes as charter rates change for ships of various sizes. Under current market
conditions, lightering in most instances costs less than terminaling, primarily
by allowing very-large and ultra-large crude carriers to cover the larger
portion of the total journey.
The U.S. Oil Pollution Act of 1990 also prohibits single-hulled tankers
built after 1990 from entering U.S. territorial waters, regardless of whether
for lightering or docking purposes. In addition, this law prohibits all vessels
utilizing single-hulls from entering U.S. territorial waters after 2010. The
U.S. Coast Guard has modified these restrictions through regulations which
permit lightering activities in restricted lightering zones near the U.S. East
coast and Gulf coast. The Canadian Standards for Double Hull Construction of Oil
Tankers currently prohibit single-hulled oil tankers, constructed after July
1993, and after January 1, 2010, prohibit substantially all single-hulled oil
tankers from entering Canadian territorial waters. Currently, approximately 80%
of the world's very-large and ultra-large crude carriers are single-hulled. The
majority of such vessels were built prior to 1990.
BLENDING
Increasingly stringent environmental regulations in the U.S., Canadian and
European marketplaces create additional demand for facilities that can blend a
variety of components into finished products that meet such regulations as well
as customers' specific requirements. Blending requires specialized equipment and
expertise. In addition, blenders must have a full range of blendstocks
available. The evolving reformulated gasoline market in the U.S., resulting
primarily from emission-reduction regulations, including the U.S. Clean Air Act,
as amended, tightening specifications for distillates and the increasing need
for blended residual fuel are expected to enhance the growth of the product
blending segment of the terminaling industry. We regularly blend components to
make finished gasolines and various grades of residual fuel. Fuel oils are also
blended for utilities and other commercial uses and crude oils are blended for
refiners.
PROCESSING
Atmospheric distillation is a process that applies heat to separate the
hydrocarbons in crude oil into several petroleum products. Most simple
distillation units, including ours, produce at least three product streams:
naphtha, distillate (heating oil) and residual fuel. The profitability of
atmospheric distillation is dependent on feedstock, operating and other costs
compared to the value of the resulting products.
SEASONAL AND OPPORTUNITY STORAGE
Refiners and traders use storage facilities to take advantage of seasonal
movements and anomalies in the crude oil and petroleum products markets. When
crude oil and petroleum product markets are in contango by an amount exceeding
storage costs, the time value of money, the cost of a second vessel plus the
cost of loading and unloading at a terminal, the demand for storage capacity at
terminals usually increases. When crude oil and petroleum products markets are
in backwardation for any length of time, the traditional users of terminal
storage facilities are less likely to store product, thereby reducing storage
utilization levels. Historically, heating oil has been in contango during the
summer months and gasoline has been in contango during the winter months. As a
result, demand for heating oil storage is typically strongest during the summer,
fall and winter months and demand for gasoline storage is typically strongest in
the winter, spring and summer months. We can give no assurances, however, that
the crude oil and petroleum products markets will follow these patterns in the
future.
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CRUDE OIL SPOT PRICE VS. FOUR MONTH FUTURE PRICE
[GRAPHIC]
Source: New York Mercantile Exchange
Since late 1997, all segments of the crude oil and petroleum products
markets have generally been in contango. As a result, previously available
storage tank capacity began to diminish and storage tank lease rates began to
rise during 1998. The shift toward contango is due in part to the current
worldwide excess supply of crude oil, which has resulted in a sharp decrease in
spot prices for most petroleum products. This contango condition followed an
unusually long period of backwardation for all segments of the crude oil and
petroleum products markets which stretched from the beginning of 1995 to late
1997. We believe that our business was adversely impacted during the
backwardation period. Several factors contributed to this unusually long
backwardation period, including anticipation of incremental crude oil supplies
entering the market from Iraq and elsewhere, a shift to "just in time inventory"
positions by many oil companies, and strong demand for petroleum products.
During 1998 and 1999, members of the Organization of Petroleum Exporting
Countries in conjunction with other non-OPEC members attempted to reduce
worldwide crude oil production with the intent of supporting oil market prices
for petroleum products. An agreement to reduce production was achieved in 1999.
Although we continue to monitor and evaluate developments, we are not aware of
any matters emanating from the recent meetings and agreement that adversely
impact our current terminaling business.
BUNKER SALES
"Bunkering" means the sale and delivery of fuels to marine vessels to be
used for their own engines. The customer base and suppliers of bunker fuel are
located worldwide. Sales of bunker fuel, which includes diesel oil, gas oil and
intermediate fuel oil, are driven primarily by the proximity of the supply
location to major shipping routes and ports of call, the amount of cargo carried
by marine vessels and the price, quantity and quality of bunker fuel.
Bunker fuel is sold under international standards of quality that are
recognized by both fuel suppliers and ship operators. Components for bunker
fuels are purchased in bulk lots of various grades and then blended to meet
customer specifications. Each supplier is responsible for quality control and
other merchantability aspects of the fuel they sell.
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Traditionally, the bunker fuel business was concentrated in those ports
with high ship traffic and near primary sources of refined marine fuels. In
recent years, the number of refiner/suppliers in many ports has diminished,
primarily in the U.S., Canada and Europe. As a result, the sale of bunker fuel
has increased at locations outside the U.S., Canada and Europe.
As many vessels have large bunker fuel tanks that allow them to travel long
distances between refueling stops, we compete with bunker delivery locations
around the world. In the Western Hemisphere, there are significant alternative
bunker locations, including on the U.S. East coast and Gulf coast and in Panama,
Puerto Rico, Aruba, Curacao, Halifax, Rotterdam and various North Sea locations.
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BUSINESS
INTRODUCTION AND HISTORY
We believe we are one of the five largest independent marine terminaling
companies in the world as measured in terms of storage capacity. At the end of
1998, our tank capacity was 18.7 million barrels. We believe we are the largest
independent marine terminal operator handling crude oil imported into the
Eastern United States and Canada. Our two terminals are strategically located at
points of minimal deviation from major shipping routes. We provide terminaling
services for crude oil and refined products to many of the world's largest
producers of crude oil, integrated oil companies, oil traders, refiners,
petrochemical companies and ship owners. Our customers include Saudi Aramco and
Tosco. These customers transship their products through our facilities to the
Americas and Europe. We own and operate one storage and transshipment facility
located at the island of St. Eustatius, Netherlands Antilles, and one located at
Point Tupper, Nova Scotia, Canada. In connection with our terminaling business,
we also provide related value-added services, including:
o bunkering, which is the supply of fuel to marine vessels for their own
engines;
o crude oil and petroleum product blending and processing; and
o bulk product sales.
Our operations began in 1982 as Statia Terminals N.V., with an oil products
terminal located on the island of St. Eustatius. In 1984, CBI Industries, Inc.,
an industrial gases and contracting services company, acquired a controlling
interest in Statia Terminals N.V. We purchased Statia Terminals Southwest, Inc.
with its facility at Brownsville, Texas, in 1986. In 1990, CBI Industries became
the sole owner of Statia Terminals N.V. and Statia Terminals Southwest. In 1993,
we acquired the remaining shares not then owned by us of Statia Terminals Point
Tupper, Incorporated, located at Point Tupper. In 1996, Praxair, Inc. acquired
CBI Industries. In November 1996, Castle Harlan Partners II L.P., members of our
management and others acquired from Praxair all of the outstanding capital stock
of Statia Terminals N.V., Statia Terminals, Inc., their subsidiaries and some of
their affiliates. Castle Harlan Partners II L.P. is a private equity investment
fund managed by Castle Harlan, Inc., a private merchant bank. At the same time,
Statia Terminals Point Tupper, Incorporated was amalgamated into Statia
Terminals Canada, Incorporated. Statia Terminals Group, Statia Terminals
International and Statia Terminals Canada were organized for purposes of
facilitating the acquisition by Castle Harlan and our management. In July 1998,
we sold Statia Terminals Southwest to an unaffiliated third party purchaser.
Simultaneously with the closing of this offering, Statia Terminals Group,
will redeem or reclassify all of its currently outstanding capital stock, and it
will issue the common shares offered hereby, the subordinated shares and the
incentive rights. As a result, Praxair's investment in it will be terminated,
and the other current holders of Statia Terminals Group's capital stock will
continue to own equity of Statia Terminals Group in the form of the subordinated
shares and incentive rights. See "The Restructuring."
Our day-to-day operations are managed at the respective terminal locations.
Our management team and employee base possess a diverse range of experience and
skills in the terminaling industry. This experience has permitted us to better
understand the objectives of our customers and to forge alliances with those
customers at our terminals to meet those objectives. Thus, we believe that our
operations extend beyond the traditional approach to terminaling. We are a
premier provider of the core services offered by other terminal operators. In
addition, unlike many of our competitors, we refrain from competing with our
customers and provide ancillary, value-added services tailored to support the
particular needs of our customers.
Our earnings before interest expense, income taxes, depreciation and
amortization increased from $20.3 million in 1996 to $22.5 million in 1997 and
to $30.1 million in 1998. During 1996, 1997 and 1998, our cash flows from
operations were $11.3 million, $9.8 million and $18.2 million, respectively.
During these same years we experienced net losses of $3.2 million, $8.4 million
and $1.5 million, respectively. However, on a pro forma basis for 1998, our
earnings before interest expense, income taxes, depreciation and amortization
and our net income were $32.9 million and $9.7 million, respectively. Earnings
before interest expense, income taxes, depreciation and amortization is
presented to provide additional
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information related to our ability to service debt. Earnings before interest
expense, income taxes, depreciation and amortization is not an alternative
measure of operating results or cash flow from operations. For information on
our bunker and bulk product sales and terminaling services segments, as well as
information with respect to our geographic operations, please see note 14 of our
consolidated financial statements.
COMPETITIVE STRENGTHS
We believe that the quality and breadth of our services and our market
presence distinguish us as one of the leading independent marine terminaling
companies in the world. We believe that we are well positioned to compete in the
independent marine terminaling industry and that our most significant
competitive strengths are:
o Strategic Locations. Our facilities are strategically located near the
U.S. East coast and Gulf coast. Our St. Eustatius facility is located at a point
of minimal deviation from the major shipping routes from the Arabian Gulf via
the Cape of Good Hope, from West Africa to the U.S. East coast and Gulf coast
and from the Panama Canal and South America to Europe. Our Point Tupper facility
is located on the Strait of Canso at Point Tupper, Nova Scotia, a point of
minimal deviation from the shipping routes from the North Sea oil fields to the
U.S. East coast, Canada and the Midwestern U.S. via the St. Lawrence Seaway and
the Great Lakes system. At Point Tupper we operate the deepest independent
ice-free marine terminal on the North American Atlantic coast. The St. Eustatius
facility can accommodate all of, and the Point Tupper facility can accommodate
substantially all of, the world's largest fully-laden very-large and ultra-large
crude carriers. Due to draft restrictions, many U.S. ports cannot accommodate
many of the world's largest fully-laden very-large and ultra-large crude
carriers.
We offer a lower cost alternative to U.S. based marine terminals, primarily
due to the fact that the U.S. Jones Act and particular other U.S. regulations do
not apply to our locations. The Jones Act mandates that cargo transported
between two U.S. ports be carried only on American-manufactured,
- -registered and -crewed vessels, the costs of which are generally considerably
higher than those of comparable foreign vessels. In addition, other U.S.
regulations require the use of expensive double-hulled vessels and unlimited
liability insurance. As a result, use of our foreign facilities is considerably
more cost-effective than use of U.S.-based marine terminals for transshipment to
other U.S. destinations.
o High Quality Assets. We have built or renovated approximately 80% of our
tank capacity and related marine installations during the last eight years.
Since 1990, we have tripled our storage capacity at St. Eustatius and added an
offshore single point mooring buoy with loading and unloading capabilities. At
Point Tupper, we converted and renovated a former refinery site into an
independent storage terminal. We believe that the speed at which our facility
can discharge or load crude oil and petroleum products and the level of
maintenance and automation and the diversity of our service capabilities at our
facilities generally equals or exceeds that of our competitors. Our other
facilities constructed prior to 1990 have been maintained to high standards and
are in good condition.
o Breadth of Services. We believe we have a broader range of services than
any of the other independent terminals with which we compete. In addition to
storage, we provide several complementary services which generate ancillary
revenues and additional storage and throughput volume. Such services include
bunkering, crude oil and petroleum product blending and processing, emergency
and spill response, bulk product sales and other ship services. For example, we
own butane storage spheres at each of our facilities which enhance our gasoline
blending capabilities, and we own an atmospheric distillation unit at our St.
Eustatius facility for refining crude oil and petroleum products. We utilize our
butane storage spheres and atmospheric distillation unit to improve the quality
and value of our customers' products.
o Free Trade Status. Our St. Eustatius facility has qualified for
designation as a free trade zone and our Point Tupper facility has qualified for
designation as a custom bonded warehouse. Such status allows us and our
customers to transship products to other destinations and trade with other
customers with minimal Netherlands Antilles or Canadian tax effects.
o Experienced Management Team. Members of our senior management average
over 25 years of experience in terminaling-related industries. Prior to
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joining us, members of our management worked at companies such as Pakhoed USA,
Inc., GATX Corporation, The Coastal Corporation, Exxon, Hess, Petroleos de
Venezuela S.A. and CBI Industries. Their experience has included training in
terminal operations, crude oil and petroleum
blending, oil trading, shipping, engineering, construction and project
management, refinery operations, sales and marketing, and finance. Senior
management experience has enabled us to develop key strategic relationships with
customers at our terminal locations.
BUSINESS STRATEGY
Our business strategy is to manage our operations so we can generate stable
cash flow and make the target quarterly distribution on all of the common and
subordinated shares and to increase our asset values. We intend to pursue this
strategy principally by:
o Developing Strategic Relationships. To maximize recurring revenues
generated by charges for storage and throughput, we target customers who have a
continuing need to store crude oil and petroleum products to supply a specific
demand, such as a refinery or other downstream distribution to customers. We
seek to understand the long term needs of our principal customers and potential
customers and to modify our facilities and operations to meet those needs. To
provide maximum flexibility to our customers, our tanks have been designed and
constructed to handle a range of crude oil and petroleum products. In some cases
we may, together with a customer, design and build additional storage or
processing facilities. We can also offer a customized mix of terminaling related
services that improve the quality of or add value to our customers' products. In
this manner, we try to provide long term logistical solutions for these
customers at our strategically located facilities and thereby become their
preferred provider of storage and other terminaling services.
o Generating Stable Cash Flow Through Long Term Contracts. We have
generally entered into long term storage contracts with the customers with whom
we have established strategic relationships. These contracts generally have
terms of one to five years plus, in most cases, renewal options. These contracts
provide us with minimum monthly payments and generate a stable cash flow from
both the contracted storage services and the provision of terminaling-related
services to these customers and the vessels that transport their products, such
as dock charges and standby emergency response fees. Approximately 71% of our
1998 tank capacity and approximately 64% of our 1998 storage and throughput
revenues, excluding related ancillary services, were from long term contracts.
o Emphasizing Customer Confidentiality. In contrast to many of our
competitors, we do not compete with our customers in the business of trading
crude oil and petroleum products. This ensures that we take full advantage of
the most important competitive advantage of terminal operations that are
independent from producers, refiners and pipeline operators--confidentiality. We
believe that, in general, our customers prefer to do business with providers of
services who are not competitors in order to maintain the secrecy of important
business data that could affect the demand for and the pricing of their product.
o Capitalizing on a Wide Range of Value-Added Services Offered. We seek to
further differentiate ourselves from our competitors and to increase revenues
through our comprehensive range of terminaling-related services which currently
includes bunkering, crude oil and petroleum product blending and processing,
emergency and spill response, bulk product sales and various ship services.
o Developing Opportunities at our Point Tupper Facility. Our facility at
Point Tupper is the deepest independent ice-free marine terminal on the North
American Atlantic coast and one of two independent terminals on the North
American Atlantic coast with the capacity to receive substantially all of the
largest fully-laden very-large and ultra-large crude carriers. Point Tupper
provides regional oil producers seeking to expand their market share in the U.S.
with a facility that is approximately two days by ship from the New York, New
Jersey and Philadelphia refineries. Point Tupper also has access by ship to the
Sarnia, Ontario, Quebec and the U.S. Mid-West refineries. Producers can gain a
strategic advantage by using the Point Tupper terminal to deliver cargo via
very-large or ultra-large crude carriers and then transshipping the cargo via
smaller ships suitable for access to shallower, draft-restricted ports on the
upper U.S. East coast. We believe that currently there is no competitor in the
region that can provide the combination of crude oil storage, crude
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oil and petroleum product blending, and transshipment services we offer at Point
Tupper. We are seeking to attract additional storage business from producers of
crude oil and natural gas in the North Sea and from the emerging production
areas located in Eastern Canada. We have a substantial amount of available land
at Point Tupper. We plan to build new storage facilities at Point Tupper as the
demand for storage increases.
o Expanding Our Bunkering Operations. In order to compete with busy U.S.,
Canadian and European ports and to attract more ship operators, we seek to
provide reliable supply, timely delivery, and consistent quality of bunker fuel
while maintaining overall safety standards. We seek to further develop our
business at Point Tupper and expand this business to additional locations in
Eastern Canada by capitalizing on our reputation for consistently maintaining a
supply of quality marine fuels and lubricants for delivery to bunkering
customers. In addition, we plan to pursue opportunities to supply bunkers at
additional locations in the Caribbean from our St. Eustatius facility.
o Strategic Acquisitions. From time to time we will consider opportunities
to acquire other marine terminals and related businesses.
SERVICES AND PRODUCTS
We provide storage services in tanks which are designed to meet our
customers specifications and a full range of terminaling-related services,
including product blending, heating, mixing, separation, and removal of water
and other impurities. Our facilities can handle a variety of petroleum
materials, including light, medium and heavy crude oils, residual fuel oil,
gasoline, gasoline blending components, diesel, marine gas oil, marine diesel
oil, aviation fuel, bunker fuel, and butane. Residual fuel oil is comprised of
the residue from the distillation of crude oil after the light oils, gasoline,
naphtha, kerosene and distillate oils are extracted. We also handle petroleum
diluents, lubricating oils, butane and various other petroleum products.
We own seven berthing locations where vessels may load and discharge crude
oil and petroleum products at our St. Eustatius facility and two berthing
locations at our Point Tupper facility. With these berthing locations and our
uniquely designed mooring facilities and piping configurations, we can handle
oil tankers of various sizes, from relatively small to some of the largest in
the world and provide services such as simultaneous discharging and loading of
vessels and "across the dock" transfers. We charter tugboats and own other
marine equipment to assist with docking operations and provide port services.
We specialize in "in-tank" or "in-line" blending with computer-assisted
blending technology that assures product integrity and homogeneity. Our
facilities can blend and mix a full range of petroleum products including
gasoline, residual fuel oils, including bunker fuel, and crude oil. We believe
our blending capability has attracted customers who have leased capacity
primarily for blending purposes and who have contributed to our bunker fuel and
bulk product sales. We have worked closely with residual fuel oil market
participants, including refiners and oil traders, to assist them with their
blending operations.
We own storage spheres for butane at both of our facilities that enhance
our gasoline blending capabilities. We also own an atmospheric distillation unit
for refining at St. Eustatius. We use the storage spheres and the distillation
unit to improve product quality and add value to our customers' products.
As part of our petroleum product sales, we supply bunker fuel in the
Caribbean and in Nova Scotia, Canada. At and around St. Eustatius, our bunkering
business has evolved from offering bunker fuel to ships at the terminal berths
to a delivery system utilizing specially modified barges which provide fuel to
vessels at anchor. In the first quarter of 1996, we initiated bunker fuel
service operations at Point Tupper with deliveries via pipeline at the terminal
berths and by truck in the surrounding Strait of Canso area. During 1996, 1997
and 1998, 615, 575 and 582 vessels, respectively, received bunker fuels from us
in the Caribbean. During this period, we have concentrated our sales and
marketing efforts in the Caribbean to sell larger volumes of fuel per vessel
call. During this period the average volume of bunker fuel delivered per vessel
has increased as has the total volume delivered, while the number of vessels
bunkering at our facility has varied from year to year. In Canada during 1996,
1997 and 1998, 19, 10 and 3 vessels, respectively, received bunker fuels from
us. During this period, we were generally unable to secure an adequate source of
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supply in Canada, and therefore, we leased the storage capacity that we had
previously allocated to storage of bunker fuel.
We purchase small quantities of petroleum products primarily to maintain an
inventory of blendstocks and bunker fuel. From time to time we purchase and sell
product to accommodate customers who wish to dispose of small quantities of
product or assist customers' sales activities and occasionally to take advantage
of attractive buying opportunities.
Netherlands Antilles and Canadian environmental laws and regulations
require ship owners, vessel charterers, refiners and terminals to have access to
spill response capabilities. At St. Eustatius, we own and operate the M/V Statia
Responder (formerly known as the M/V Megan D. Gambarella), a 194 foot
multi-function emergency response and maintenance vessel with spill response and
firefighting capabilities and underwater diving support. The Statia Alert, a
barge that is capable of recovering 200 gallons per minute of oil/water mixture,
and two response boats that can deploy booms to contain a spill within a
particular area and release absorbent materials, support our emergency and spill
response capability at St. Eustatius. The St. Eustatius facility also has three
tugs on time charter, and owns a line handling vessel and two mooring launches,
all of which are available for safe berthing of vessels calling at the terminal
and for emergency and spill response. Our customers benefit by ready access to
this equipment, and we charge each vessel that calls at our St. Eustatius
facility a fee for this capability.
Statia Terminals Canada charters tugs, mooring launches and other vessels
to assist with the movement of vessels through the Straight of Canso, the safe
berthing of vessels at Point Tupper and other services to vessels.
Statia Terminals Canada owns and operates two fully-equipped spill response
vessels on Cape Breton Island in Canada, one located at Point Tupper and the
other located in Sydney, Nova Scotia. In the event of an oil spill, these
vessels can deploy containment and clean-up equipment including skimmers to
retrieve product from the surface of the water, booms to contain spills, and
absorbents to absorb spilled product. We believe that the presence of fully
equipped spill response vessels in port is important in attracting customers to
our facilities.
PRICING
Storage and throughput pricing in the petroleum terminaling industry is
subject to a number of factors, including variations in petroleum product
production and consumption, economic conditions, political developments,
seasonality of demand for particular products and the geographic sector of the
world being serviced. At the customer level, terminal selection focuses
primarily on:
o the location;
o the quality of service; and
o the range of services offered.
Although price is always an issue, price differentials among competing terminals
are frequently less important to the customer because terminaling costs
represent only a small portion of the customer's total distribution costs.
In developing our pricing strategy, we consider petroleum market conditions
and oil price trends. We also take into consideration the quality and range of
our services compared to those of competing terminals, prices prevailing at the
time in the terminaling market in which we operate, and cost savings from
shipping to our terminal locations. In situations requiring special
accommodations for the customer (e.g. unique tank modification or construction
of new tanks), we may price on a rate-of-return basis.
We enter into written storage and throughput contracts with customers.
During 1998, approximately 64% of our storage and throughput revenues, excluding
related ancillary services, were attributable to long term storage and
throughput agreements of one year or more. Our long-term storage and throughput
agreements are individually negotiated with each customer. The typical agreement
specifies tank storage volume, the commodities to be stored, a minimum monthly
charge, an excess throughput charge for throughput volume in excess of the
volume specified in the storage contract and a price escalator. In addition,
there may be charges for additional services such as the transfer, blending,
mixing, heating, decanting and other processing of stored commodities. The
minimum monthly charge is due and payable without regard to the volume of
storage capacity, if any, actually utilized. For the minimum monthly charge, the
user is generally allowed to deliver, store for one month and remove the
specified tank storage volume of commodities. As an incentive for
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the user to throughput additional barrels, the excess throughput charge is
typically a lower rate per barrel than the rate per barrel utilized in
establishing the minimum monthly charge. Year-to-year escalation of charges is
typical in long-term contracts.
INFORMATION BY LOCATION
ST. EUSTATIUS, NETHERLANDS ANTILLES
We own a terminaling facility located on the Netherlands Antilles island of
St. Eustatius which is located at a point of minimum deviation from major
shipping routes. St. Eustatius is approximately 1,900 miles from Houston, 1,500
miles from Philadelphia, 550 miles from Amuay Bay, Venezuela, and 1,100 miles
from the Panama Canal. This facility is capable of handling a wide range of
petroleum products, including crude oil and refined products. A three-berth
jetty, a two-berth monopile with platform and buoy systems, a floating hose
station and an offshore single point mooring buoy with loading and unloading
capabilities serve the terminal's customers' vessels.
This facility has 27 tanks with a total capacity of 5.2 million barrels
dedicated to fuel oil storage, 15 tanks with total capacity of 1.1 million
barrels dedicated to petroleum products storage, a 15,000 barrel butane sphere,
and eight tanks totaling 5.0 million barrels dedicated to multigrade crude oil
storage. The fuel oil and petroleum product facilities have in-tank and in-line
blending capability. The crude storage is the newest portion of the facility,
construction of which was completed in early 1995 by a subsidiary of Chicago
Bridge & Iron Company. The storage tanks comply with construction standards that
meet or exceed American Petroleum Institute, National Fire Prevention
Association and other material industry standards. Crude oil movements at the
terminal are fully-automated. In addition to the storage and blending services
at St. Eustatius, this facility has the flexibility to utilize some storage
capacity for both feedstock and refined products to support its atmospheric
distillation unit, which is capable of processing up to 15,000 barrels per day
of feedstock, ranging from condensates to heavy crude oil.
The St. Eustatius facility can accommodate the world's largest vessels for
loading and discharging crude oil. The single point mooring system can handle a
single fully-laden vessel of up to 520,000 dead weight tons, which is a marine
vessel's cargo carrying capacity, with a draft of up to 120 feet. The single
point mooring system can discharge or load at rates in excess of 100,000 barrels
of crude oil per hour. There are six pumps connected to the single point mooring
system, each of which can pump up to 18,000 barrels per hour from the single
point mooring system to the storage tanks. The jetty at St. Eustatius can
accommodate three vessels simultaneously. The south berth of the jetty can
handle vessels of up to 150,000 dead weight tons with a draft of up to 55 feet.
The north berth of the jetty can handle vessels of up to 80,000 dead weight tons
with a draft of up to 55 feet. There is also a barge loading station on the
jetty. At the south and north berths of the jetty, 25,000 barrels per hour of
fuel oil can be discharged or loaded. To accommodate the needs of our gasoline
blending customers, we have recently completed installation of a monopile with
platform that can handle vessels of up to 40,000 dead weight tons with a draft
of up to 46 feet. The monopile with platform can handle two vessels
simultaneously and can discharge or load 12,000 barrels per hour of refined
products. In addition, this facility has a floating hose station that we use to
load bunker fuels onto our barges for delivery to customers. We believe that the
speed at which our facility at St. Eustatius can load crude oil and petroleum
products off of or onto vessels gives us a competitive advantage due to
reductions in the time ships spend idle in ports.
Notwithstanding periods of unusually adverse market conditions, including
the backwardation which persisted from the first quarter of 1995 to the fourth
quarter of 1997, the average percentage of our available capacity that we leased
at the St. Eustatius facility for each of the years ended 1996, 1997, and 1998
was 80%, 76% and 92% respectively. We believe that cost advantages associated
with the location of our facility, shipping economies of scale, product blending
capabilities and the availability of a full range of ancillary services at the
facility has driven the demand for our storage services. Storage capacity at the
St. Eustatius facility has grown from 2.0 million barrels of fuel oil storage in
1982 to its present capacity of 11.3 million barrels for crude oil and petroleum
products.
The ability to blend a comprehensive range of refined products from
gasoline through residual fuel oils has contributed to our success in leasing
the
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facility's tankage. We have generally leased our refined product tanks at or
near full capacity on a continuous basis. We have worked closely with residual
fuel oil market participants to assist them with their blending operations by
offering a selection of product blending components and computerized blending
services. We have a five-year contract, which is subject to renewal for an
additional term of 5 years at the customer's discretion, with Bolanter
Corporation, a subsidiary of Saudi Aramco, for 5.0 million barrels of dedicated
crude oil storage. Bolanter uses this storage to service a number of its
customers in the Western Hemisphere. The terminal enables Bolanter to transport
various grades of crude oil closer to market, at competitive transportation
rates.
Recognizing the strategic advantage of its location in the Caribbean near
major shipping lanes, we deliver bunker fuel to vessels at our St. Eustatius
facility. The bunkering business has evolved from offering fuels to ships at the
berth to a delivery system utilizing specially modified barges that provide fuel
to vessels at anchorage. The location of the terminal on the leeward side of the
island, which provides natural protection for ships, generally favorable
year-round weather conditions and deep navigable water at an anchorage
relatively close to shore, attracts ships to this facility for their bunker fuel
requirements. Four of our barges support the bunker fuel sales operation.
During 1998, we commissioned an atmospheric distillation unit at St.
Eustatius. The unit is capable of processing up to 15,000 barrels per day of
feedstock ranging from condensates to heavy crude oil. This distillation unit
can produce naphtha, distillate (heating oil) and residual fuel oil. We believe
that the capability to process feedstock for third parties may create
opportunities for us.
We own and operate all of the berthing facilities at our St. Eustatius
terminal for which we charge vessels a dock charge. Vessel owners or charterers
may incur separate charges for facilities use and associated services such as
pilotage, tug assistance, line handling, launch service, emergency and spill
response and ship services.
POINT TUPPER, NOVA SCOTIA, CANADA
We own a terminaling facility located at Point Tupper in the Strait of
Canso, near Port Hawkesbury, Nova Scotia, Canada, which is located at a point of
minimal deviation from major shipping routes. Point Tupper is approximately 700
miles from New York City, 850 miles from Philadelphia and 2,500 miles from
Mongstad Terminal in Norway. This facility operates the deepest independent
ice-free marine terminal on the North American Atlantic coast, with access to
the U.S. East coast, Canada and the Midwestern U.S. via the St. Lawrence Seaway
and the Great Lakes system. The Point Tupper facility can accommodate
substantially all of the largest fully laden very-large and ultra-large crude
carriers for loading and discharging.
We renovated our facilities at Point Tupper and converted a former oil
refinery site into an independent storage terminal. This work, performed
primarily by a subsidiary of Chicago Bridge & Iron Company, began in 1992 and
was completed in 1994. The tanks were renovated to comply with construction
standards that meet or exceed American Petroleum Institute, National Fire
Prevention Association and other material industry standards.
We believe that our dock at Point Tupper is one of the premier dock
facilities in North America. The outer berth of the Point Tupper facility's
dock, Berth One, can handle fully laden vessels of up to 400,000 dead weight
tons with a draft of up to 84 feet. At Berth One, approximately 75,000 barrels
per hour of crude oil, approximately 40,000 barrels per hour of diesel or
gasoline, or 12,000 barrels per hour of fuel oil can be discharged or loaded.
Berth Two can accommodate vessels of up to 80,000 dead weight tons with drafts
of up to 40 feet. At Berth Two, approximately 25,000 barrels per hour of crude
oil, approximately 25,000 barrels per hour of diesel or gasoline, or
approximately 25,000 barrels per hour of fuel oil can be discharged or loaded.
Liquid movement at the terminal is fully automated. The Point Tupper facility
can accommodate two vessels simultaneously. We charge separately for the use of
the dock facility as well as associated services, including pilotage, tug
assistance, line handling, launch service, spill response and ship services.
The berths at the dock at the Point Tupper facility connect to a 7.4
million barrel tank farm. The terminal has the capability of receiving and
loading crude oil, petroleum products and particular petrochemicals. This
facility has eight tanks with a combined capacity of 3.6 million barrels
dedicated to multigrade crude oil storage, two tanks with a combined capacity of
0.5 million barrels dedicated to fuel oil storage and 24 tanks with a combined
capacity of 3.3 million barrels dedicated to
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<PAGE>
petroleum products storage, including gasoline, gasoline blend components,
diesel and distillates. During 1997, approximately two-thirds of the storage
tanks dedicated to petroleum products were converted to crude oil storage. The
facility also has a 55,000 barrel butane storage sphere. This sphere is one of
the largest of its kind in North America, and we expect it to enhance our
petroleum products blending operations. The average capacity leased at the Point
Tupper facility over each of the last three years ended 1996, 1997, and 1998 was
55%, 70% and 93%, respectively.
In order to comply with our safe handling procedures and Canadian
environmental laws, we own and operate two fully equipped spill response vessels
on Cape Breton Island, one located at Point Tupper and the other located in
Sydney. In addition to these vessels, we have the capability to respond to
spills on land or water with a combined spill response capability of over 2,500
metric tons at this terminal location. An additional 7,500 metric ton spill
response capability is immediately available at Point Tupper by agreement with
another response organization. Our customers benefit by ready access to the
equipment. In 1995, one of our subsidiaries was granted Canadian Coast Guard
certification as a response organization with spill response capabilities.
Consequently, vessels calling in the Strait of Canso are required to pay us a
subscription fee for access to the services provided by the spill response
organization, even if they do not dock at our terminal.
There are two truck racks at the Point Tupper facility. The north truck
rack has the capability to load 550 barrels per hour of fuel oil and the south
truck rack has the capability to load 550 barrels per hour of fuel oil or up to
550 barrels per hour of diesel.
In 1994, a predecessor to one of our subsidiaries entered into a long term
storage contract with a large oil refiner, Tosco Corporation. The contract
contains two five-year renewal options at the customer's discretion. The
contract commits 3.6 million barrels of crude oil storage at the Point Tupper
facility, representing approximately 49% of the terminal's total capacity. Tosco
recently exercised its option to extend the contract into 2004. A portion of the
remaining tanks at the Point Tupper facility, initially designed for the storage
of gasoline, distillates, aviation fuel and other petroleum products, was
converted during 1997 to crude oil storage and leased. Currently, 71% of this
facility's tankage is dedicated to crude oil, 23% to clean, refined products and
6% to residual fuel oil.
In the first quarter of 1996, we initiated the offering of bunkering
services at Point Tupper. Delivery of bunker fuel at Point Tupper is currently
being made via pipeline to vessels transferring cargo at the berths and via
truck to vessels in the surrounding area.
In 1998, we entered into a 25 year land lease on a portion of our land at
Point Tupper and a 12 year product storage agreement with Sable Offshore Energy,
Inc. The lease provides options to extend for two additional 25 year periods.
Sable is leasing the site, building a natural gas liquids fractionation plant,
storage and rail handling facilities on the site, and leasing over 500,000
barrels of our existing storage capacity. The fractionation plant will process
an average of 20,000 barrels per day of natural gas liquids extracted from the
Sable Island region of Nova Scotia, Canada, and delivered via pipeline for the
fractionation plant from Sable's Goldboro Gas Processing Plant in Guysborough
County, Nova Scotia. While the natural gas liquid volumes will vary according to
field source and production rates, the fractionation plant is expected to
produce about 10,300 barrels per day of condensate (light oil), 6,250 barrels a
day of propane, and about 3,250 barrels per day of butane. The fractionation
plant is currently under construction and is expected to be completed by
November 1999.
We are finalizing a land exchange agreement with the Province of Nova
Scotia conveying particular land we own at the Point Tupper terminal site to the
Province of Nova Scotia in exchange for the conveyance by the Province of Nova
Scotia of unused road rights-of-way on our remaining property at Point Tupper.
The land being transferred to the Province is principally the approximately
1,296 acres comprising Lake Landrie and adjacent watershed land.
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COMPETITION
The main competition to crude oil storage at our facilities is from
lightering. Under current market conditions, lightering in most instances costs
less than terminaling. The price differential between lightering and terminaling
is primarily driven by the charter rates for vessels of various sizes because
terminaling generally occupies a very-large or ultra-large crude carrier for a
shorter period of time than lightering. A very-large crude carrier can be
lightered in approximately four days if lightering vessels are available for
continuous back to back operations and the weather is good. However, if fewer
lightering vessels are available or bad weather interrupts, it can take longer
to load or discharge product. Depending on charter rates, the longer charter
period associated with lightering is generally offset by various costs
associated with terminaling including storage costs, dock charges and spill
response fees. In addition, terminaling reduces the risk of environmental damage
associated with lightering.
The independent terminaling industry is fragmented and includes both large,
well-financed companies that own many terminal locations, and smaller companies
that may own a single terminal location. We are a member of the Independent
Liquid Terminals Association, which among other functions, publishes a directory
of terminal locations of its members throughout the world. Customers with
specific geographic and other logistical requirements may use the ILTA directory
to identify the terminals in the region available for specific needs and to
select the preferred providers on the basis of service, specific terminal
capabilities and environmental compliance.
In addition to the terminals owned by independent terminal operators, many
state-owned oil producers and major energy and chemical companies also own
extensive terminal facilities, and these terminals often have the same
capabilities as terminals owned by independent operators. While the purpose of
such terminals is to serve the operations of their owners, and they do not
customarily offer terminaling services to third parties, these terminals
occasionally are made available to the market when they have unused capacity on
a short term and irregular basis. Such terminals lack competitive advantages of
independent operators, the most important of which is confidentiality.
In many instances, major energy and chemical companies that own storage and
terminaling facilities are also significant customers of independent terminal
operators. Such companies typically have strong demand for terminals owned by
independent operators when independent terminals have more cost-effective
locations near key transportation links such as deep-water ports. Major energy
and chemical companies also need independent terminal storage when their captive
storage facilities are inadequate, either because of size constraints, the
nature of the stored material or specialized handling requirements.
Independent terminal owners compete based on the location and versatility
of their terminals, service and price. A favorably located terminal will have
access to cost-effective transportation both to and from the terminal. Possible
transportation modes include waterways, railroads, roadways and pipelines.
Terminal versatility is a function of the operator's ability to offer safe
handling for a diverse group of products with potentially complex handling
requirements. The primary service function provided by the terminal is the safe
storage and return of all of the customer's product while maintaining product
integrity. Terminals may also provide additional services, such as heating,
blending, water removal and processing with assurance of proper environmental
handling procedures or vapor control to reduce evaporation.
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We believe our competitors to our terminaling business include:
<TABLE>
<CAPTION>
STORAGE CAPACITY
NAME(1) LOCATION (BARRELS)
- ---------------------------------------------------------------------------- -------------------- -----------------------
<S> <C> <C>
ST. EUSTATIUS
Baprovin (BORCO).......................................................... Bahamas 10,475,000(2)
Bonaire Petroleum Corp. N.V............................................... Bonaire, N.A. 10,100,000(2)
Commonwealth Oil Refining Company (CORCO)................................. Puerto Rico 12,000,000(3)
South Riding Point Holding, Ltd........................................... Bahamas 5,200,000
POINT TUPPER
International-Matex Tank Terminals........................................ Bayonne, NJ 14,000,000
GATX Terminals Corporation................................................ Carteret, NJ 6,652,000
South Riding Point Holding, Ltd........................................... Bahamas 5,200,000
Stolthaven Perth Amboy Inc................................................ Perth Amboy, NJ 2,146,000(4)
International-Matex Tank Terminals........................................ Quebec City, Canada 1,270,000
Multiple.................................................................. NY/NJ Harbor (Greater Than)35,000,000
</TABLE>
- ------------------
Source: OPIS Directories Petroleum Terminal Encyclopedia 1999, Tenth Edition,
unless otherwise specified.
(1) Does not include captive terminals other than those which provide to third
parties a significant amount of their capacity on a somewhat regular basis.
Captive terminals are generally used almost exclusively for the operations
of the producers, refiners or pipeline operators who own them and are only
occasionally made available to the market on a short term basis. Captive
terminals lack competitive advantages of independent operations, the most
important of which is confidentiality. See "Industry."
(2) Information provided to us by a source we believe to be reliable.
(3) We believe such storage capacity to be less than fully useable.
(4) Source: OPIS Petroleum Terminal Encyclopedia, Ninth Edition.
In our bunkering business, we compete with the ports to which or from which
each vessel travels or bypasses.
CUSTOMERS
Our customers include many of the world's largest producers of crude oil,
integrated oil companies, oil traders, refiners, petrochemical companies and
ship owners.
We presently have several significant long term contracts at St. Eustatius,
including a five-year contract with a five-year renewal option at the customer's
discretion with Bolanter Corporation, N.V., which became effective in early
1995. Bolanter Corporation is a subsidiary of Saudi Aramco. This storage and
throughput contract commits all of the St. Eustatius facility's current crude
oil storage capacity to Bolanter, which represents approximately 44% of the
terminal's total capacity and 7.4% of our 1998 revenues, with an additional 7.7%
of our 1998 revenues derived from parties unaffiliated with Bolanter but
generated by the movement of Bolanter's products through the St. Eustatius
terminal. In addition, revenues from another affiliate of Saudi Aramco which
received bunker fuels at our St. Eustatius facility accounted for 1.5% of our
total 1998 revenues.
In addition, we presently have several significant long term contracts at
Point Tupper, including a five-year contract with two five-year renewal options,
at the customer's discretion, with a major refiner, a subsidiary of Tosco
Corporation. This contract became effective in August 1994, and Tosco recently
exercised its option to extend the contract into 2004. This contract commits
approximately 49% of the present tank capacity at Point Tupper. It represented
approximately 7.1% of our 1998 revenues, with an additional 1.9% of our 1998
revenues being derived from parties unaffiliated with Tosco but generated by the
movement of Tosco's products through the Point Tupper terminal.
In addition, we have another terminaling services customer which
represented 5.2% of our 1998 revenues. We also supply bunker fuel to a customer
which represented 8.5% of our 1998 revenues.
No other customer accounted for more than 5% of our total 1998 revenues.
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SUPPLIERS
We presently have a bunker fuel supply contract at St. Eustatius with a
major state-owned oil producer, which became effective in 1992 and was recently
renewed until February 28, 2000. This contract presently provides us with the
majority of the fuel oil necessary to support our bunker and bulk product sales
requirements. We procure the balance of our fuel oil and other supplies
necessary for our operations from various sources. We believe that suitable
alternate sources of supply are readily available from which we can procure fuel
oil should deliveries under our current contract be interrupted or are not
renewed. However, such alternative sources of supply are subject to changing oil
market conditions and prices.
At Point Tupper, we are attempting to secure an adequate source of supply
for our bunker fuel sales business to enable significant increases in volumes
for delivery to vessels calling at this facility.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
Our subsidiaries are subject to comprehensive and periodically changing
environmental, health and safety laws and regulations within the jurisdictions
of our operations, including those governing oil spills, emissions of air
pollutants, discharges of wastewater and storm waters, and the disposal of
non-hazardous and hazardous waste. We believe we are presently in substantial
compliance with applicable laws and regulations governing environmental, health
and safety matters. We have taken measures to mitigate our exposure to
environmental risks including automation and monitoring equipment, employee
training, maintaining our own emergency and spill response equipment at each
terminal and maintaining liability insurance for some, but not all, accidental
spills. The following table shows our capital expenditures in millions of
dollars for compliance with environmental laws and regulations and routine
operational compliance costs for the periods indicated.
<TABLE>
<CAPTION>
CAPITAL ROUTINE OPERATIONAL
PERIOD EXPENDITURES COSTS
- ------------------------------------------------------------------------------- ------------ -------------------
<S> <C> <C>
1996........................................................................... $1.3 $ 0.4
1997........................................................................... 1.3 0.2
1998........................................................................... 2.7 0.9
</TABLE>
ST. EUSTATIUS
Until recently, the St. Eustatius terminal has not been subject to
significant environmental, health and safety regulations, and health, safety and
environmental audits have not been required by law. No environmental or health
and safety permits are required for the St. Eustatius terminal except under the
St. Eustatius Nuisance Ordinance. A license under the St. Eustatius Nuisance
Ordinance was issued to us in February 1997 subject to compliance with
particular requirements. The requirements established by the license set forth
specific environmental standards for operation of the facility, including
monitoring of air emissions, limits on and monitoring of waste-water discharges,
establishment of a waste-water treatment system, standards for above-ground
storage tanks and tank pits, reporting and clean-up of any soil or water
pollution and specific site security measures. To date, we have complied with
the license requirements and do not expect further compliance to have a material
adverse effect on our business and financial condition, results of operations or
our ability to make the target quarterly distribution. We will address future
improvements to the facility that may be necessary to comply with new
environmental, health and safety laws and regulations, if any, as they arise.
The St. Eustatius terminal management and consultants supervise the on and
off-site disposal and storage of hazardous waste materials. The nature of our
business is such that spills of crude oil or petroleum products may occur at the
terminal periodically. Over the past three years, all spills at the St.
Eustatius terminal were reported to the appropriate environmental authorities
and have not resulted in any citations by such authorities for
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violations of law. We have remediated all such spills.
Two government inspections were performed during each of 1997 and 1998 with
no citations issued.
POINT TUPPER
The Point Tupper terminal is subject to a variety of environmental, health
and safety regulations administered by the Canadian federal government and the
Nova Scotia Department of Environment. While air emission monitoring is not
required by the NSDOE, surface water discharge outfall and groundwater
monitoring are required and are performed on a routine basis in accordance with
current requirements of the permit issued by NSDOE. We believe we have all
requisite environmental permits in place. The principal permit is the Industrial
Waste Treatment Works Permit last issued by the NSDOE on March 8, 1999 and
expiring December 31, 2008. The nature of our business is such that spills of
crude oil or refined products may occur at the terminal periodically. Over the
past three years, all spills at the Point Tupper terminal were reported and
remediated to the satisfaction of the applicable agencies and have not resulted
in any citations by such authorities. Statia Terminals Canada has recently
discovered a leak in one tank, has emptied the tank and is in the process of
repairing it and remediating the spillage.
Past uses of the facility by others, including its past operation by others
as an oil refinery, have resulted in particular on-site areas of known and
potential contamination, as described under "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Environmental, Health
and Safety Matters."
EMPLOYEES
As of November 30, 1998, excluding contract labor, we employed 211 people.
Forty employees were located in the U.S., 98 on St. Eustatius, and 73 at Point
Tupper. A majority of our employees at both the St. Eustatius and Point Tupper
facilities are unionized. We believe that our relationships with our employees
are good. We have never experienced a material labor related business
disruption.
ST. EUSTATIUS
The Windward Islands Federation of Labor represents the majority of hourly
workers at St. Eustatius. We entered into an agreement with WIFOL on June 1,
1993, which extended to May 31, 1996. The agreement provided for automatic one
year extensions if neither party requested an amendment. We have not requested
or received any requests for an extension. We believe that the agreement no
longer binds us, but we continue to provide pay and benefits to the hourly
workers as if the agreement was still in effect. In early 1997, management and a
select group of supervisory and office personnel at St. Eustatius discussed
organizing into a collective bargaining group. We believe these matters will not
materially impact our business and financial condition, results of operations or
ability to make the target quarterly distribution.
POINT TUPPER
The Communications, Energy and Paperworkers Union represents a majority of
Point Tupper's hourly work force. During 1995, we signed a three-year agreement
with CEPU that expired on September 30, 1998. We are currently negotiating with
CEPU with the aid of a government-appointed conciliator and continuing our
operations without an agreement. We believe these matters will not materially
impact our business and financial condition, results of operations or ability to
make the target quarterly distribution.
We have experienced two minor work stoppages in the last four years. In
April 1994, employees stopped working for approximately one-half of a day to
protest alleged inadequate safety conditions at the facility. The following
April, electricians picketed for approximately two hours to protest the
employment of non-union workers on one project. Most of the workers at the
facility were unaffected by the activity.
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LEGAL PROCEEDINGS
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Legal Proceedings."
INSURANCE
Our property insurance covers damage to the real and personal property
located at our two terminals and administrative offices. The property loss limit
is $150 million with a $0.1 million deductible, except for a $0.5 million
deductible for some losses caused by natural forces, such as wind, flood and
earthquake, at St. Eustatius. We carry various layers of liability coverage of
up to $200 million with a deductible of approximately $0.3 million, including
coverage for liabilities associated with some accidental spills. We carry
$30 million of coverage on the offshore single point mooring system at St.
Eustatius with a deductible of approximately $0.3 million. We have coverage up
to scheduled values for damage to our marine vessels with a $50,000 deductible.
We also carry other insurance customary in the industry.
Our current insurance program commenced December 31, 1998 and generally
extends 15 months.
We believe that the cost of business interruption insurance does not
warrant carrying it under current market conditions. Therefore, we do not have,
and do not plan to carry, business interruption insurance except with respect to
our offshore single point mooring system.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
At the closing, the board of directors of Statia Terminals Group will be
divided into 3 classes. The directors serve six year terms which are staggered
such that approximately one-third of the directors are elected every two years.
The board of directors of Statia Terminals Group duly elects the executive
officers to serve until their respective successors are elected and qualified.
The following table sets forth certain information with respect to the
directors and executive officers of Statia Terminals Group:
<TABLE>
<CAPTION>
TERM
NAME AGE POSITION EXPIRES
- ----------------------------------------------- --- ---------------- -------
<S> <C> <C> <C>
James G. Cameron(3)............................ 53 Director 2005
John K. Castle(2)(3)........................... 58 Director 2005
Admiral James L. Holloway, III(1).............. 76 Director 2003
Francis Jungers(2)............................. 72 Director 2003
David B. Pittaway(1)(2)(3)..................... 47 Director 2005
Jonathan R. Spicehandler(1).................... 50 Director 2001
Ernest "Jackie" Voges.......................... 67 Director 2001
Justin B. Wender(1)............................ 29 Director 2003
Thomas M. Thompson, Jr......................... 54 Vice President
Robert R. Russo................................ 43 Vice President
James F. Brenner............................... 40 Vice President
and Treasurer
Jack R. Pine................................... 59 Secretary
</TABLE>
- ------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Executive Committee.
Pursuant to a shareholders agreement among all of the shareholders of
Statia Terminals Holdings, which will consist of all of our present owners
except Praxair, the board of directors of Statia Terminals Holdings will
determine how the subordinated shares and any common shares held by Statia
Terminals Holdings will be voted, including voting for directors of Statia
Terminals Group. Under the agreement, these shares must be voted in favor of one
nominee of our executive officers, who must be one of our employees. Statia
Terminals Holdings will be controlled by Castle Harlan and its affiliates.
The directors of Statia Terminals, Inc., an indirect subsidiary of Statia
Terminals Group, are currently elected annually by their shareholders to serve
during the ensuing year or until a successor is duly elected and qualified. The
board of directors of Statia Terminals, Inc. duly elects the executive officers
to serve until their respective successors are elected and qualified.
The following table sets forth certain information with respect to certain
directors and executive officers of Statia Terminals, Inc.:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
James G. Cameron........................... 53 Director, Chairman of the Board and
President
Thomas M. Thompson, Jr..................... 54 Director and Executive Vice President
Robert R. Russo............................ 43 Director and Senior Vice President
Jack R. Pine............................... 59 Senior Vice President, General Counsel and
Secretary
John D. Franklin........................... 42 Vice President--Marine Fuel Sales
James F. Brenner........................... 40 Vice President--Finance, Treasurer and
Assistant Secretary
</TABLE>
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<PAGE>
James F. Brenner. Mr. Brenner has been Vice President and Treasurer of
Statia Terminals Group since December 23, 1996. Mr. Brenner joined us in 1992,
as our Controller, and was promoted to his present position in May, 1996.
Immediately prior to joining us, he served three years as Vice President,
Finance and Chief Financial Officer of Margo Nursery Farms Inc., a publicly
traded agribusiness firm with European and Latin American operations. From 1986
to 1990, Mr. Brenner was Treasurer of Latin American Agribusiness Development
Corp., a company providing debt and equity financing to agribusinesses
throughout Latin America. His duties included serving as director for several of
its corporate investments. From 1981 to 1986, Mr. Brenner held various positions
with the international accounting firm of PricewaterhouseCoopers (formerly Price
Waterhouse LLP). Mr. Brenner is a licensed Certified Public Accountant in
Florida (inactive status).
James G. Cameron. Mr. Cameron has been a director of Statia Terminals Group
since February 6, 1997. Mr. Cameron has been with us since 1981. From 1981 to
1984, Mr. Cameron served as the Project Manager spearheading the design and
construction of the St. Eustatius terminal facility. Mr. Cameron was promoted in
1984 to Executive Vice President of Statia Terminals, Inc. Since being named
President and Chairman of the Board of Statia Terminals, Inc. in 1993,
Mr. Cameron has served on the board of directors of Tankstore, which was a joint
venture company of CBI Industries, GATX Corporation and Paktank International
B.V. Mr. Cameron has also served on the board of directors of Petroterminal de
Panama, where he represented CBI Industries' ownership in the pipeline
traversing the isthmus of Panama. His prior experience in the petroleum industry
dates back to 1969 when he joined Cities Service Company as a marine engineer.
Mr. Cameron subsequently joined Pakhoed USA, Inc., where he served in a variety
of positions including Project Engineer, Manager of Engineering & Construction,
Maintenance Manager and Terminal Manager, which included the management of
Paktank's largest facility in Deer Park, Texas.
John K. Castle. Mr. Castle has been a director of Statia Terminals Group
since February 6, 1997. Mr. Castle is Chairman and Chief Executive Officer of
Branford Castle, Inc., an investment company formed in 1986. Since 1987,
Mr. Castle has been Chairman of Castle Harlan, Inc., a private merchant bank in
New York City. Mr. Castle is Chief Executive Officer of Castle Harlan Partners
II, G.P. Inc., the general partner of the general partner of Castle Harlan
Partners II L.P., which is our controlling stockholder. Immediately prior to
forming Branford Castle, Inc. in 1986, Mr. Castle was President and Chief
Executive Officer and a director of Donaldson Lufkin & Jenrette, Inc., which he
joined in 1965. Mr. Castle is a director of Sealed Air Corporation, Morton's
Restaurant Group, Inc., Commemorative Brands, Inc. and Universal Compression,
Inc. He is a trustee of the New York Medical College (for 11 years he was
Chairman of the Board), a member of The New York Presbyterian Hospital's Board
of Trustees, a member of the board of the Whitehead Institute for Biomedical
Research and is a member of the Corporation of the Massachusetts Institute of
Technology. Mr. Castle has also served as a director of The Equitable Life
Assurance Society of the United States.
John D. Franklin. Mr. Franklin joined us in March, 1992 as Manager, Marine
Sales and has been the Vice President--Marine Fuel Sales since 1996. He also
serves as a director of Petroterminal de Panama. Immediately prior to joining
us, he was employed for 14 years with The Coastal Corporation, and its former
subsidiary, Belcher Oil Co. Inc. His duties with Coastal included management of
the company's marine sales division; Manager, National Accounts, and Terminal
Manager at Coastal's New Orleans facility. He has extensive experience in
marketing, terminal operations, and technical sales support.
Admiral James L. Holloway III, U.S.N. (Ret.). Adm. Holloway has been a
director of Statia Terminals Group since April 29, 1997. Adm. Holloway is a
retired Naval Officer who served as Chief of Naval Operations and a member of
the Joint Chiefs of Staff from 1974 to 1978. After his retirement, from 1981 to
1989 he was President of the Council of American Flag Ship Operators, a national
trade association representing the owners and operators of U.S. flag vessels in
foreign trade. From 1985 to 1989 he was a member of the President's Blue Ribbon
Commission on Merchant Marine and Defense, and the Commission for a Long Term
Integrated Defense Strategy. In 1986, Admiral Holloway was appointed Special
Envoy of the Vice President to the Middle East and from 1990 to 1992 he served
in a presidential appointment as U.S. Representative to the South Pacific
Commission. Admiral Holloway is currently
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Chairman of the Naval Historical Foundation, Chairman of the Naval Academy
Foundation, a Governor of St. Johns College and chairman of the Board of
Trustees of Saint James School.
Francis Jungers. Mr. Jungers has been a director of Statia Terminals Group
since April 29, 1997. Mr. Jungers is a private investor and business consultant
in Portland, Oregon. Mr. Jungers has been a consultant since January 1, 1978.
From 1973 to 1978, he was Chairman and Chief Executive Officer of Arabian
American Oil Company which is the largest producer of crude and liquified gas in
the world and holds the concession for all of Saudi Arabia's oil production.
Mr. Jungers is a director of Georgia Pacific Corporation, Thermo Ecotek
Corporation, Thermo Electron Corporation, ThermoQuest Corporation, ONIX Systems
Corporation, Donaldson, Lufkin & Jenrette, Inc., The AES Corporation and ESCO
Corporation. Mr. Jungers is Chairman of the Advisory Board of Common Sense
Partners, L.P., a hedge fund. Mr. Jungers is a member of the Visiting Committee,
The University of Washington. Mr. Jungers is Advisory Trustee of the Board of
Trustees, The American University in Cairo and Trustee of the Oregon Health
Sciences University Foundation.
Jack R. Pine. Mr. Pine has been Statia Terminals Group's Secretary since
December 23, 1996. Mr. Pine has been involved with our legal affairs since our
inception and was formally transferred to Statia Terminals, Inc. from CBI
Industries, Inc. in May 1996 as Senior Vice President, General Counsel and
Secretary. Mr. Pine also serves as a director of Petroterminal de Panama. He has
over 30 years of combined experience with Liquid Carbonic Industries
Corporation, CBI Industries and us. Mr. Pine joined the legal staff of CBI
Industries in 1974 as Assistant Counsel and was appointed Associate General
Counsel in 1984. Prior to joining CBI Industries, Mr. Pine practiced law in the
private sector.
David B. Pittaway. Mr. Pittaway has been a director of Statia Terminals
Group since September 3, 1996. Mr. Pittaway is Senior Managing Director and has
been Vice President and Secretary of Castle Harlan, Inc. a private merchant bank
in New York City, since February 1987. Mr. Pittaway is an executive officer of
Castle Harlan Partners II, G.P. Inc., the general partner of the general partner
of Castle Harlan Partners II L.P., our controlling stockholder. Mr. Pittaway has
been Vice President and Secretary of Branford Castle, Inc., an investment
company, since October 1986. From 1987 to 1998 he was Vice President and Chief
Financial Officer and a director of Branford Chain, Inc., a marine wholesale
company where he is now a director and Vice Chairman. Mr. Pittaway is also a
director of Morton's Restaurant Group, Inc., Charlie Brown's Holdings, Inc., and
Commemorative Brands, Inc. Prior to 1987, Mr. Pittaway was Vice President of
Strategic Planning and Assistant to the President of Donaldson Lufkin &
Jenrette, Inc.
Robert R. Russo. Mr. Russo has been a Vice President of Statia Terminals
Group since December 23, 1996. Mr. Russo joined us in 1990 as Manager, Sales,
and was promoted to his present position in May, 1996. His prior experience in
the petroleum industry dates back to 1979 when he joined Belcher Oil Co. Inc., a
subsidiary of The Coastal Corporation. Mr. Russo was Coastal's Vice President,
Heavy Products Trading, from 1987 until his departure to join us in 1990.
Jonathan R. Spicehandler, M.D. Dr. Spicehandler has been a director of
Statia Terminals Group since April 29, 1997. Since 1993, Dr. Spicehandler has
been President of Schering-Plough Research Institute, the pharmaceutical
research arm of Schering-Plough Corporation, a research based company engaged in
the discovery, development, manufacturing and marketing of pharmaceutical and
health care products worldwide. Dr. Spicehandler is a diplomat of the American
Board of Internal Medicine. He was also elected to the Alpha Omega Alpha Honor
Society. He serves as president emeritus, board of managers, of the New Jersey
division of Cancer Care, Inc. Dr. Spicehandler is a member of the boards of
trustees of the Kessler Institute for Rehabilitation, Inc. and Montclair State
University. He also serves on the board of directors of the National Foundation
of Infectious Diseases and on the Science Policy Board of the Liberty Science
Center. Dr. Spicehandler is a member of the board of associates of the Whitehead
Institute for Biomedical Research.
Thomas M. Thompson, Jr. Mr. Thompson has been a Vice President of Statia
Terminals Group since December 23, 1996. Mr. Thompson has been with us since
1985 when he joined as Vice President, Sales & Marketing. He has also held the
position of Senior Vice President, with full
69
<PAGE>
responsibility for our Houston, Texas, sales and operations and President of
JASTATIA, Inc., a marine vessel operating joint venture between Jahre Ship
Services A/S and us. Mr. Thompson became Executive Vice President in May, 1996.
His prior experience in the petroleum and chemical industry dates back to 1968
when he joined GATX Corporation as a sales representative. He subsequently
worked as both a sales manager and General Manager with Pakhoed USA, Inc.
Ernest "Jackie" Voges. Mr. Voges has been a director of Statia Terminals
Group since February 2, 1998. From 1982 to 1996, Mr. Voges was General Managing
Director of the Curacao Ports Authority. From 1977 to 1982, Mr. Voges held
various positions including Dean of the Law School of the University of the
Netherlands Antilles, permanent lecturer for the history of law and a member of
the International Advisory Council of Florida International University. From
1973 to 1977, he served in various positions within the government for Land
Territory of the Netherlands Antilles including Vice Prime Minister, Minister of
Justice and Minister of Transport and Communications. From 1967 to 1969
Mr. Voges served as Minister of Public Health. From 1959 to 1967, he was a
member of the Island Council of the Island Territory of Curacao and from 1966 to
1967 he was Commissioner of the Island Territory of Curacao. Mr. Voges is
Managing Director of Leeward News Holding N.V., Chairman of the Foundation
Stichting Monumentenzorg Curacao and Supervisory Director of Stadsherstel
Corporation N.V. He is also Chairman of the Foundation Stichting JEKA,
Supervisory Director of Smit International Corporation N.V., and Managing
Director of Voges Inc. Corporation N.V. In 1979, Mr. Voges was Knighted in the
Order of the Dutch Lion.
Justin B. Wender. Mr. Wender has been a director of Statia Terminals Group
since September 3, 1996. Since 1993, he has been employed by Castle Harlan, Inc.
He currently serves as Director. From 1991 to 1993, Mr. Wender worked in the
Investment Banking Group of Merrill Lynch & Co. He is a board member of Charlie
Brown's Holdings, Inc. and Land 'N' Sea Holdings, Inc.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
or accrued for the year ended December 31, 1998 for our chief executive officer
and each of our five other most highly compensated executive officers (the
"named executive officers").
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
------------------------------------------
ANNUAL COMPENSATION SHARES LONG-TERM
RESTRICTED UNDERLYING INCENTIVE
NAME AND PRINCIPAL -------------------- OTHER ANNUAL STOCK OPTIONS/SARS PLAN
POSITION(1) YEAR SALARY($) BONUS($) COMPENSATION($)(2) AWARDS($)(3)(4) (#SHARES)(5) PAYOUTS($)
- ------------------------- ---- --------- -------- ------------------ --------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
James G. Cameron......... 1998 275,482 211,875 -- -- 615 --
1997 248,655 97,050 -- -- 630 --
1996 215,000 -- -- 919,000 -- --
Thomas M.
Thompson, Jr........... 1998 241,549 173,750 -- 490 --
1997 208,434 79,000 -- -- 500 --
1996 169,260 -- -- 695,000 -- --
Robert R. Russo.......... 1998 199,232 145,000 -- 425 --
1997 178,883 68,400 -- -- 430 --
1996 150,936 -- -- 625,000 -- --
Jack R. Pine............. 1998 161,929 97,500 -- -- 185 --
1997 129,450 51,550 -- -- 190 --
1996 115,190 11,500 -- 311,000 -- --
John D. Franklin......... 1998 139,616 97,500 -- -- 185 --
1997 128,653 49,250 -- -- 190 --
1996 94,967 4,500 -- 238,000 -- --
James F. Brenner......... 1998 130,289 91,250 57,587 -- 175 --
1997 108,895 43,400 -- -- 165 --
1996 81,252 -- -- 212,000 -- --
<CAPTION>
LONG TERM COMPENSATION AWARDS
------------------------------
NAME AND PRINCIPAL ALL OTHER
POSITION(1) COMPENSATIONS($)(6)
- ------------------------- -------------------
<S> <C>
James G. Cameron......... 69,525
68,077
52,229
Thomas M.
Thompson, Jr........... 16,677
15,449
1,440
Robert R. Russo.......... 13,816
12,680
510
Jack R. Pine............. 11,410
10,648
450
John D. Franklin......... 10,784
10,059
479
James F. Brenner......... 10,941
9,033
43
</TABLE>
70
<PAGE>
- ------------------
(1) James G. Cameron became President and Chairman of the Board of Statia
Terminals, Inc. on July 27, 1993. Thomas M. Thompson, Jr. became Executive
Vice President of Statia Terminals, Inc. on May 6, 1996. Robert R. Russo
became Senior Vice President of Statia Terminals, Inc. on May 6, 1996. Jack
R. Pine became Senior Vice President, General Counsel and Secretary of
Statia Terminals, Inc. on May 6, 1996. James F. Brenner became Vice
President Finance, Treasurer and Assistant Secretary of Statia Terminals,
Inc. on May 6, 1996.
(2) The compensation reported for 1998 represents $35,923 of relocation expenses
and $21,664 of tax reimbursements paid to Mr. Brenner.
(3) In November 1996, Statia Terminals N.V. awarded a total of $3.0 million of
its preferred stock to James G. Cameron (919 shares), Thomas M.
Thompson, Jr. (695 shares), Robert R. Russo (625 shares), Jack R. Pine (311
shares), John D. Franklin (238 shares) and James F. Brenner (212 shares).
This award of Statia Terminals N.V. preferred stock was subject to a
specified restriction period which commenced on the date of the award, and
other conditions set forth in the restricted stock award agreement between
Statia Terminals N.V. and the recipient of such stock. Each recipient
surrendered each of his shares of Statia Terminals N.V. preferred stock in
exchange for a unit consisting of one share of Statia Terminals Group's
common stock and one share of Series E Preferred Stock. The units were also
subject to substantially similar restrictions and conditions as the Statia
Terminals N.V. preferred stock, as set forth in a restricted unit award
agreement between Statia Terminals Group and each such recipient. Prior to
the expiration of the restriction period, recipients could not sell,
transfer, pledge, assign, encumber or otherwise dispose of their units. Such
restriction periods applicable to Statia Terminals Group's stock comprising
such units lapsed, pursuant to the award agreements, in November 1998.
(4) The table does not include loans to executive officers by Statia Terminals
Group secured by restricted units of Statia Terminals Group's preferred and
common stock. (See "Stockholder Loans" below.)
(5) Represents options to purchase Statia Terminals Group common stock awarded
under the 1997 Stock Option Plan. The fair values at the dates of grant,
November 21, 1997 and December 3, 1998, were determined by the compensation
committee of Statia Terminals Group's board of directors to be $0.10 per
share and $0.10 per share for the 1997 and 1998 grants. The award agreement
specifies that after two years of employment after the date of grant and
after each of the following three years, 25% of the option shall become
exercisable unless a liquidation event occurs (as defined in the award
agreement). If a liquidation event occurs, the option shall become fully
exercisable. The option will terminate upon the employee's termination of
employment except in the event of death, permanent disability or termination
by us other than for substantial cause. Each option shall expire ten years
after the date of grant.
(6) The compensation reported for 1998 represents: (a) the dollar value of split
dollar life insurance benefits paid by us, (b) matching and discretionary
contributions made to our 401(k) plan and (c) the cost of life insurance in
excess of limits prescribed by the Internal Revenue Code. These benefits,
expressed in the same order as listed in the preceding sentence, amounted to
$50,789, $16,000 and $2,736 for Mr. Cameron; $0, $14,200 and $2,477 for
Mr. Thompson; $0, $13,000 and $816 for Mr. Russo; $0, $10,600 and $810 for
Mr. Pine; $0, $10,600 and $184 for Mr. Franklin; and $0, $10,400 and $541
for Mr. Brenner.
71
<PAGE>
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1998
The following table sets forth particular information regarding options
granted to the named executive officers during 1998. We have not granted any
stock appreciation rights.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
% OF
TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE AT ASSUMED
SHARES GRANTED ANNUAL RATES OF STOCK APPRECIATION
UNDERLYING TO FOR OPTION TERM
OPTIONS EMPLOYEES EXERCISE MARKET EXPIRATION ---------------------------------------
NAME GRANTED IN 1998 PRICE PRICE(1) DATE 0% 5% 10%
- -------------------------- ---------- --------- -------- ------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James G. Cameron.......... 615 21.2% $ 0.10 $810.00 12/3/08 $498,088.50 $811,372.36 $1,292,011.31
Thomas M.
Thompson, Jr............ 490 16.9% 0.10 810.00 12/3/08 396,851.00 646,459.28 1,029,407.38
Robert R. Russo........... 425 14.7% 0.10 810.00 12/3/08 344,207.50 560,704.48 892,853.34
Jack R. Pine.............. 185 6.4% 0.10 810.00 12/3/08 149,831.50 244,071.36 388,653.81
John D. Franklin.......... 185 6.4% 0.10 810.00 12/3/08 149,831.50 244,071.36 388,653.81
James F. Brenner.......... 175 6.0% 0.10 810.00 12/3/08 141,732.50 230,878.31 367,645.49
</TABLE>
- ------------------
(1) The market price on the date of grant, December 3, 1998, was determined
based on a valuation performed at our request by an independent consulting
firm which specializes in these matters.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth particular information concerning options to
purchase common stock exercised by the named executive officers during 1998 and
the number and value of unexercised options held by each of the named executive
officers at December 31, 1998.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1998
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1998 DECEMBER 31, 1998(1)
ON VALUE ------------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- -------- -------- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James G. Cameron................... 0 0 0 1,245 0 $983,425.50
Thomas M. Thompson, Jr............. 0 0 0 990 0 782,001.00
Robert R. Russo.................... 0 0 0 855 0 675,364.50
Jack R. Pine....................... 0 0 0 375 0 296,212.50
John D. Franklin................... 0 0 0 375 0 296,212.50
James F. Brenner................... 0 0 0 340 0 268,212.50
</TABLE>
- ------------------
(1) There was no public trading market for Statia Terminals Group's common stock
as of December 31, 1998. The market price of the common stock on
December 31, 1998 was determined based on a valuation performed as of
December 3, 1998 at our request by an independent consulting firm. The
indicated market price as of December 3, 1998 of $810 per share was reduced
to $790 per share as of December 31, 1998 primarily due to additional
dividends accrued on the Statia Terminals Group's preferred stock during
this period. Preferred stock dividends reduce the equity value of common
stockholders.
72
<PAGE>
OLD STOCK OPTION PLAN
Statia Terminals Group's 1997 Stock Option Plan will terminate at the
closing of this offering. Options to purchase an aggregate of 6,145 shares of
common stock have been issued under this plan. All of such options have an
exercise price of $0.10 per share. None of such options have been exercised, but
all of such options will be exercised at or by the closing of this offering. No
further options will be issued under this plan.
NEW SHARE OPTION PLAN
Effective immediately prior to the closing of the offering we will adopt
our 1999 Share Option Plan. The option plan is intended to further our success
by increasing the proprietary interest of our key employees, directors and
consultants and to enhance our ability to attract and retain employees and
directors of outstanding ability. This is a summary of the option plan. You
should read the text of the option plan, which we filed as an exhibit to the
registration statement of which this prospectus is a part, for a full statement
of the terms and provisions of the option plan.
We may deliver up to 1,140,000 common shares, subject to adjustment if
particular capital changes affect the common shares, pursuant to incentive stock
options and non-qualified stock options granted to selected employees and
directors under the option plan. Such shares may be either authorized and
unissued shares or previously issued shares held as treasury shares.
An option permits, but does not require, the recipient to purchase up to a
particular number of common shares, by exercising the option, at a price fixed
when the option is granted, during a specified period of time following such
grant, if particular conditions are satisfied.
The compensation committee of our board of directors administers the option
plan. The compensation committee selects eligible employees and directors to
receive options, determines the price and number of common shares covered by
options and the terms under which options may be exercised, but in no event
later than 10 years from the date on which an option is granted, and sets the
other terms and conditions of options in accordance with the provisions of the
option plan. Recipients of options under the option plan may not transfer their
options unless they die or the compensation committee determines they may.
If we undergo a change in control, the compensation committee may provide
that the exercisability of outstanding options will be accelerated or adjust
outstanding options by substituting stock or other securities of any successor
or another party to such a transaction, or cash out such outstanding options, in
any such case, generally based on the consideration received by shareholders in
such a transaction.
Subject to particular limitations specified in the option plan, our board
of directors may amend or terminate the option plan and the compensation
committee may amend options outstanding under the option plan. The option plan
will terminate no later than 10 years from the closing of this offering;
however, any then-outstanding options will remain outstanding after such
termination of the plan, in accordance with their terms.
STOCKHOLDER LOANS
On November 27, 1996, Messrs. Cameron, Thompson, Russo, Pine, Franklin,
Brenner and some other of our officers and managers were granted loans by Statia
Terminals Group to purchase shares of its common stock and Series E Preferred
Stock. The loans totaled $1.5 million and were secured by pledges of such stock.
The loans bear interest at 6.49% annually and are due on the earlier of
(1) November 26, 2003, (2) the sale of the pledged stock and (3) a "change in
control," as defined in the loan agreement.
Upon the completion of this offering, Statia Terminals Group will replace
these loans with new loans. The interest rate with respect to these new loans
will be 5.17% annually. In addition, the maturity of these loans will be
extended until the earlier of (1) April 28, 2009, (2) the sale of the pledged
stock, and (3) a "change of control" (as defined in the new loan agreement).
73
<PAGE>
EMPLOYMENT AGREEMENTS
Effective immediately prior to the closing of the offering, we will enter
into employment agreements with James G. Cameron, Thomas M. Thompson, Jr.,
Robert R. Russo, Jack R. Pine, John D. Franklin and James F. Brenner. These
agreements will provide for an annual base salary which is subject to review at
least annually by the board of directors or a committee thereof, increasing at
least at the growth rate of the consumer price index. The respective annual base
salaries currently in effect, and to continue in effect after the closing, are
$290,000 for Mr. Cameron; $245,000 for Mr. Thompson; $230,000 for Mr. Russo;
$150,000 for Mr. Pine; $150,000 for Mr. Franklin; and $150,000 for Mr. Brenner.
These agreements will also provide for an annual cash incentive bonus to be
awarded based on the difference between a target EBITDA and actual EBITDA. The
employment agreements will continue until March 31, 2002 and automatically renew
for an additional year on March 31 of every year unless either party gives
notice of non-renewal. Additional benefits include participation in an executive
life insurance plan for Mr. Cameron. In the event that we terminate any of these
employment agreements without substantial cause or the employee terminates for
good reason, as such terms are defined in each such employment agreement, the
employee shall be entitled to his current medical and dental benefits and his
current compensation. Such entitlements will last to the later of twelve months
or the remaining portion of the term of the relevant employment agreement. Such
entitlements will be payable in monthly installments for such period with the
addition of a pro rated portion of the employee's bonus compensation for the
year of termination. The bonus is only payable as and when ordinarily determined
for such year.
SPECIAL MANAGEMENT BONUS
In 1999 we accrued bonuses in the amount of approximately $1.9 million for
particular members of our management to partially reimburse these individuals
with respect to particular adverse tax consequences that will result from this
offering and other past compensation arrangements. These bonuses were
approximately: $577,000 to Mr. Cameron; $450,000 to Mr. Thompson; $396,000 to
Mr. Russo; $197,000 to Mr. Pine; $173,000 to Mr. Franklin and $155,000 to
Mr. Brenner.
74
<PAGE>
SECURITY OWNERSHIP
The following table sets forth the number and percentage of shares of
currently outstanding common stock of Statia Terminals Group beneficially owned
as of December 31, 1998, and as adjusted to reflect the sale of the common
shares offered hereby and the issuance of the subordinated shares pursuant to
the restructuring, by (1) each person known to us to be a beneficial owner of
more than 5% of any class of our voting equity securities, (2) each of our
directors and executive officers, and (3) all of our directors and executive
officers as a group. The address of each owner is our principal office unless
otherwise indicated.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
PRIOR TO THE OFFERING SUBORDINATED SHARES BENEFICIALLY
AND OWNED AFTER THE OFFERING AND
RESTRUCTURING RESTRUCTURING
------------------------ ---------------------------------
NUMBER OF NUMBER OF PERCENTAGES OF TOTAL
NAME(1) SHARES(3) PERCENTAGES SHARES(1) VOTING SHARES
- ------------------------------------------------------- --------- ----------- --------- --------------------
<S> <C> <C> <C> <C>
James G. Cameron....................................... 10,219(4) 21.69% 824,131(5) 7.23%
Thomas M. Thompson, Jr................................. 1,890 4.01% 152,423 1.34%
Robert R. Russo........................................ 1,662 3.53% 134,035 1.18%
Jack R. Pine........................................... 826 1.75% 66,614 0.58%
John D. Franklin....................................... 728 1.55% 58,711 0.52%
James F. Brenner....................................... 650 1.38% 52,420 0.46%
John K. Castle(2)...................................... 33,750 71.63% 2,721,832 23.88%
c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
David B. Pittaway...................................... 200 0.42% 16,129 0.14%
Justin B. Wender....................................... 10 0.02% 806 0.01%
Admiral James L. Holloway III.......................... 150 0.32% 12,097 0.11%
Francis Jungers........................................ 200 0.42% 16,129 0.14%
Dr. Jonathan R. Spicehandler........................... 200 0.42% 16,129 0.14%
Ernest Voges........................................... 100 0.21% 8,065 0.07%
All Officers and Directors(2).......................... 42,580 90.3% 3,433,943 30.1%
Castle Harlan Partners II L.P., affiliates and Castle
Harlan employees(2).................................. 33,750 71.63% 2,721,832 23.88%
c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Statia Terminals Holdings N.V.......................... -- -- 3,800,000 33.3%
</TABLE>
- ------------------
(1) All of the shareholders listed, other than Statia Terminals Holdings, are
shareholders of Statia Terminals Holdings and therefore may be deemed
beneficial owners of shares owned by Statia Terminals Holdings, and all of
the shares listed as being owned by such shareholders after the offering and
restructuring will be owned by Statia Terminals Holdings.
(2) Mr. Castle is the controlling shareholder of the general partner of the
general partner of Castle Harlan Partners II L.P. He may therefore be deemed
to be the beneficial owner of shares beneficially owned by Castle Harlan
Partners II L.P., its affiliates and Castle Harlan employees. Mr. Castle
disclaims beneficial ownership of the shares owned by Castle Harlan Partners
II L.P., its affiliates and Castle Harlan employees other than such shares
that represent his pro rata partnership interests in Castle Harlan Partners
II L.P. and its affiliates.
(3) Includes shares which will be acquired pursuant to the exercise of stock
options at the closing in the amount of 1,245 shares for Mr. Cameron; 990
shares for Mr. Thompson; 855 shares for Mr. Russo; 375 shares for Mr. Pine;
375 shares for Mr. Franklin; 340 shares for Mr. Brenner; 100 shares for
Adm. Holloway; 100 shares for Mr. Jungers; 100 shares for Dr. Spicehandler;
and 100 shares for Mr. Voges.
(4) Includes 7,795 shares owned by some of our employees who have granted to Mr.
Cameron a proxy to vote such shares. Mr. Cameron disclaims beneficial
ownership of these shares.
(5) Includes 628,643 shares owned by some of our employees based on the
assumption that these employees will grant to Mr. Cameron a proxy to vote
such shares. Mr. Cameron will disclaim beneficial ownership of these shares.
75
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SALE OF BROWNSVILLE TERMINAL
In July 1998, we sold our terminal in Brownsville, Texas. We used the net
proceeds from such sale to redeem 6,150 shares of Series D Preferred Stock owned
by Castle Harlan.
MANAGEMENT AGREEMENT
As part of the acquisition by Castle Harlan of outstanding capital stock of
certain of Statia Terminals Group's subsidiaries, Statia Terminals Group entered
into a management agreement with Castle Harlan providing for the payment,
subject to some conditions, of an annual management fee of $1,350,000 plus
expenses for advisory and strategic planning services. Under the indenture
relating to the mortgage notes,
o dividends from Statia Terminals International to Statia Terminals Group
permitting it to pay Castle Harlan's annual management fee, and
o a dividend of the net proceeds of the sale of the Brownsville facility
are excepted from the limitation on restricted payments so long as no default or
event of default exists. In January 1997 and November 1997, Statia Terminals
International declared and subsequently paid on each declaration date a dividend
of $1,350,000 on its common stock to Statia Terminals Group to enable it to pay
management fees to Castle Harlan, Inc. See note 12 to our consolidated financial
statements for information on preferred and common dividends paid prior to the
acquisition of capital stock by Castle Harlan. This management agreement will
terminate at the closing of this offering, except for continuing reimbursement
for ordinary and necessary expenses and a continuing indemnity for the period up
to the termination date.
CONSULTING AGREEMENT
Pursuant to an agreement between Castle Harlan and a consultant retained
for assistance with the structuring of the acquisition of capital stock by
Castle Harlan, we paid the consultant upon completion of the acquisition an
advisory fee (the consultant in turn paid a portion of such fee to particular
entities/persons which provided services to the consultant) of $2,500,000 in
cash and 1,500 shares of Series E Preferred Stock and 1,500 shares of common
stock of Statia Terminals Group. The consultant is also a party to an agreement
with Statia Terminals N.V. dated as of January 1, 1993 pursuant to which the
consultant renders particular advisory and consulting services to Statia
Terminals N.V. and is compensated therefor.
Four of Statia Terminals Group's directors, Admiral James L. Holloway III,
Francis Jungers, Jonathan R. Spicehandler, M.D. and Ernest Voges, have entered
into consulting agreements with Statia Terminals International for advisory and
consulting services related to investment and strategic planning, financial and
other matters. In consideration of services provided to Statia Terminals
International, each consultant receives a consulting fee of $6,250 per quarter
plus reimbursement of out-of-pocket expenses. Statia Terminals Group pays each
of the foregoing directors $1,000 per meeting of the board of directors
attended.
STOCKHOLDERS' AGREEMENTS
Statia Terminals Group and its current stockholders have entered into two
stockholders' agreements which will be terminated at the closing of this
offering.
At the closing of this offering Statia Terminals Group will enter into an
agreement with Statia Terminals Holdings, which will acquire all of the
subordinated shares upon the restructuring, pursuant to which Statia Terminals
Group will grant to Statia Terminals Holdings rights, including demand rights,
with respect to registration under the Securities Act of the subordinated shares
and the common shares issuable upon conversion thereof.
LOANS TO MANAGEMENT
On November 27, 1996, Statia Terminals Group granted individual officers
and managers, including Messrs. Cameron, Thompson, Russo, Pine, Brenner and
Franklin, non-recourse loans aggregating $1.5 million and secured by pledges of
restricted stock. The loans bear interest at 6.49% annually and are due on the
earlier of
o November 26, 2003,
o the sale of the pledged stock, and
o a "change in control," as defined in the loan agreement.
Upon the completion of the offering, Statia Terminals Group will reduce the
interest rate with respect to these loans to 5.17% annually. In addition, the
maturity of these loans will be extended until the earlier of
o April , 2009,
o the sale of the pledged stock, and
o a "change of control," as defined in the loan agreement.
76
<PAGE>
BOARD OF DIRECTORS
Prior to the restructuring:
o Castle Harlan or its affiliates hold 13,850 shares of Series D
Preferred Stock, 33,750 shares of Series E Preferred Stock and
33,750 shares of the currently outstanding common stock; and
o individual directors and members of our management hold 4,724 shares
of Series E Preferred Stock and 4,724 shares of the currently
outstanding common stock and options to acquire an additional 6,145
shares of common stock.
Pursuant to the restructuring:
o Statia Terminal Group's Series D Preferred Stock and Series E
Preferred Stock will be redeemed at their liquidation preference;
o all shares of outstanding common stock consisting of 47,119 shares,
which includes an additional 6,145 shares of common stock to be
issued upon exercise of options at or by the closing, will be
reclassified as 471,190 subordinated shares;
o Statia Terminals Group will issue an additional 3,328,810
subordinated shares plus 38,000 incentive rights to the holders of
the remaining outstanding common stock; and
o all of the subordinated shares and incentive rights, and all of the
shares of Petroterminal de Panama, S.A. currently owned by Statia
Terminals Group, will be transferred at the closing to Statia
Terminals Holdings.
After the restructuring, some affiliates of Castle Harlan and some members
of our management will be directors of Statia Terminals Group. Some of the
actions taken by the board of directors may affect the amount of cash available
for distribution to holders of common and subordinated shares or accelerate the
conversion of subordinated shares. Decisions of the board of directors with
respect to the amount and timing of asset purchases and sales, cash
expenditures, borrowings, issuances of additional common shares and the
creation, reduction, cancellation or increase of reserves in any quarter will
affect whether, or the extent to which, there is sufficient available cash from
our operating surplus to meet the target quarterly distribution and additional
distributions levels on all shares in a given quarter or in subsequent quarters.
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DESCRIPTION OF COMMON SHARES
This is a summary of the material provisions of the amended articles of
incorporation of Statia Terminals Group which will be put into effect at the
closing of the offering. It is qualified in its entirety by reference to the
provisions of the articles. We will make copies of the proposed form of the
articles available as described in "Available Information." The definitions of
particular terms used in the articles and in this summary are substantially the
same as those used elsewhere in this prospectus.
GENERAL
Statia Terminals Group was incorporated on September 4, 1996, in the
Netherlands Antilles as a public company with limited liability. It will have an
authorized capital of $300,000 consisting of the following classes and number of
shares:
o 20,000,000 common shares (referred to in the articles as Class A shares),
of which at the closing 7,600,000 will be issued and outstanding and
8,360,000 will be issued if the underwriters exercise their over-
allotment option in full;
o 7,800,000 subordinated shares (referred to in the articles as Class B
shares), of which at the closing 3,800,000 will be issued and
outstanding; and
o 2,200,000 incentive rights (referred to in the articles as Class C
shares), of which at the closing 38,000 will be issued and outstanding.
Each common and subordinated share and incentive right shall have a par value of
$0.01.
Subject to the limitations described under "--Issuance of Additional
Shares" below, Statia Terminals Group has the authority to issue additional
common shares or other equity securities. The consideration and terms and
conditions of such additional issuances are established by its board of
directors in its sole discretion and do not require the approval of any of the
shareholders. Statia Terminals Group has reserved for issuance the following
common shares:
o 12,400,000 common shares if the underwriters have not exercised their
over-allotment option;
o 11,640,000 common shares if the underwriters exercise their
over-allotment option in full;
o 8,600,000 common shares if all of the subordinated shares are converted
into common shares and the underwriters have not exercised their
over-allotment option; and
o 7,840,000 common shares if all of the subordinated shares are converted
into common shares and the underwriters have exercised their
over-allotment option in full.
In addition, Statia Terminals Group has reserved for issuance 4,000,000
subordinated shares, and 2,162,000 incentive rights.
DISTRIBUTIONS AND DISTRIBUTIONS UPON LIQUIDATION
For a description of the relative rights and preferences of the common
shares, the subordinated shares and the incentive rights in and to distributions
and distributions upon liquidations, see "Cash Distribution Policy."
VOTING RIGHTS
Holders of the common shares and holders of the subordinated shares, voting
together as one class, are entitled to one vote for each share on all matters to
be voted upon by shareholders, including the election of directors.
The board of directors shall be divided into 3 classes. Of the initial
board of directors after this offering, one class will serve for two years, one
class will serve for four years and one class will serve for six years.
Thereafter, each director will serve a term of six years. In the case of a
vacancy, upon the expiration of a director's term or otherwise, directors shall
be appointed by the holders of common and subordinated shares upon nomination by
the board of directors through a non-binding resolution. Holders of common
shares and holders of the subordinated shares do not have cumulative voting
rights in the election of directors. Election of directors is by absolute
majority of votes cast at a general meeting of shareholders, for which a quorum
consists of one-third of the aggregate outstanding common shares and
subordinated shares. Accordingly, holders of a
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majority of the common shares and the subordinated shares, voting together as
one class, may elect all of the directors standing for election.
In general, resolutions must be passed by a majority of the common shares
and the subordinated shares, voting together as one class at a general meeting,
for which a quorum consists of the holders of one-third of the aggregate
outstanding common and subordinated shares. However, resolutions to amend Statia
Terminals Group's articles of incorporation, dissolve or liquidate it or dispose
of all or substantially all of its assets, require the approval of sixty-six and
two-thirds percent of the common and subordinated shares, voting together as one
class at a general meeting, for which a quorum consists of one-half of the
aggregate outstanding common and subordinated shares.
Shareholders meetings must be held in the Netherlands Antilles and may only
be called by the board of directors. One or more shareholders holding at least
10% of all outstanding shares may petition the board of directors to call a
meeting. If the board fails to call a meeting, such shareholders may petition a
Netherlands Antilles court to call a meeting.
ISSUANCE OF ADDITIONAL SHARES
Statia Terminals Group is authorized to issue up to 12,400,000 additional
common shares and 4,000,000 additional subordinated shares. The consideration
and terms and conditions of such additional issuances are established by its
board of directors in its sole discretion without the approval of any
shareholders, except as set forth in the next sentence. During the subordination
period, it may not:
o issue more than 4,000,000 additional common shares or
o issue any equity securities ranking senior to the common shares
without the prior approval of the holders of a majority of the outstanding
common shares, not including those common shares held by the holders of
incentive rights and their affiliates.
Even during the subordination period additional common shares may only be
issued if the issuance occurs:
o upon exercise of the underwriters' over-allotment option;
o upon conversion of the subordinated shares;
o pursuant to employee benefit plans;
o in the event of a combination or subdivision of common shares; or
o in connection with an acquisition or capital improvement that would have
resulted in an increase in adjusted operating surplus on a per common and
subordinated share basis pro forma for the preceding four-quarter period
or within 365 days of, and the net proceeds from such issuance are used
to repay debt incurred in connection with, the closing of such
acquisition or the completion of such a capital improvement.
The holders of common shares will not have preemptive rights to acquire
additional common shares or other securities that Statia Terminals Group may
issue.
Additional issuances of shares or other equity securities ranking junior to
the common shares may reduce the likelihood of, and the amount of, any
distributions above the target quarterly distribution.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar with respect to the common shares is
Harris Trust and Savings Bank.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
A non-United States corporation will be classified as a "controlled foreign
corporation" (a "CFC") for United States federal income tax purposes in any
taxable year of such corporation in which more than 50% of either (1) the total
combined voting power of all of its classes of stock entitled to vote or
(2) the total value of its stock, is owned or considered owned, on any day
during such taxable year, by United States persons who own or are considered to
own 10% or more of the total combined voting power of all of its classes of
stock entitled to vote ("Ten Percent Shareholders"). The CFC rules provide that
each Ten Percent Shareholder of a CFC is required to include in income each year
their pro rata share of the CFC's "Subpart F income" and investment of earnings
in U.S. property. Although we currently are a CFC, we expect that, as a result
of the offering, we will not be classified as a CFC.
Primarily to prevent becoming, or minimize the duration as, a CFC and to
prevent any ownership or transfer of the common shares which
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may result in such a classification, any sale or other disposition of common
shares by a holder of common shares (a "Sale") or any other event relating to
the common shares, that would result in a Violation of the Ownership Limit is
null and void to the extent that such Sale or event causes a Violation of the
Ownership Limit. The restriction in the preceding sentence will not apply to,
and the definition of the term "Sale" does not include, the conversion of
subordinated shares into common shares, any subsequent transfer of the common
shares resulting from such conversion, any pledge, transfer by operation of law,
gift or inheritance of any interest in the common shares, as well as any sale or
other disposition, other than a Sale, of any beneficial, as opposed to legal,
interest in the common shares or the acquisition of any common shares pursuant
to the exercise of compensatory stock options or to any of our employee benefit
plans or any subsequent transfer of those common shares. For purposes of this
prospectus, the "Ownership Limit" is 9.9% of the total combined voting power of
all of Statia Terminals Group's classes of stock entitled to vote, and a
"Violation of the Ownership Limit" occurs when (1) any person would own or would
be considered to own by virtue of the attribution provisions of the CFC rules,
or (2) any person together with its "affiliates" and "associates" (as defined in
Rule 12b-2 under the U.S. Securities Exchange Act of 1934) and any group (within
the meaning of Section 13(d)(3) of such Securities Exchange Act) of which such
person is a part would own or would be considered to own by virtue of the
beneficial ownership provisions of Rule 13d-3 under such Securities Exchange
Act, in either case more than the Ownership Limit. In addition, any pledge,
transfer by operation of law, gift, or inheritance of any interest in the common
shares, as well as any sale or other disposition, other than a Sale, of any
beneficial, as opposed to legal, interest in the common shares (a "Gift") that
would result in a Violation of the Ownership Limit is prohibited to the extent
that such Gift causes a Violation of the Ownership Limit. The restriction in the
preceding sentence will not apply to, and the definition of the term "Gift" does
not include, the conversion of subordinated shares into common shares, any
subsequent transfer of the common shares resulting from such conversion or the
acquisition of any common shares pursuant to the exercise of compensatory stock
options or to any of our employee benefit plans or any subsequent transfer of
those common shares. In order to reflect these restrictions, Statia Terminals
Group's articles include provisions to such effect. These include, in summary:
o Any person who acquires direct, indirect, actual or constructive
ownership within the meaning of the CFC rules, of common shares that
violate the foregoing restrictions on transferability and ownership is
required to give notice immediately to us and to provide us with such
other information as we may request in order to determine the effect of
such Sale, Gift (a Sale and/or a Gift to be referred to as a "Transfer")
or event on our classification as a CFC or for any other related purpose;
the restrictions on transfer and ownership described throughout this
section may be waived by the board of directors with respect to a
Transfer or any other event described above.
o We will not recognize a holder of common shares as such until its common
shares have been issued in the name of such holder of common shares or,
in the case of a Transfer, until the common shares so transferred have
been registered in the name of such transferee; until such recognition,
any voting rights, dividend rights or distribution rights of such holder
or transferee will be suspended.
o In case of a prohibited Gift, the transferee will be required to dispose
of the number of common shares that exceeds the Ownership Limit ("Excess
Common Shares") to a person whose ownership of any such shares would not
violate the Ownership Limit (a "Qualified Person") within 15 days of the
date of the prohibited Gift. The acquiror or transferee of Excess Common
Shares pursuant to a prohibited Gift (the "Prohibited Transferee") will
be required to notify the company in writing of its compliance with the
requirement in the preceding sentence within 5 days of any such
compliance (a "Compliance Notice"). If the Prohibited Transferee fails to
provide a Compliance Notice to the company in any event within 20 days of
the date of the prohibited Gift, the company will be irrevocably and
exclusively authorized to sell, on behalf of the Prohibited Transferee,
the Excess Common Shares to a Qualified Person at the fair market value
of those
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shares and to take all the necessary steps to effect that sale. In the
event of a Gift, the acquiror or transferee will by acceptance or receipt
of the relevant share certificate(s) representing any Excess Common
Shares be deemed to have agreed to the requirements set forth above.
The restrictions on ownership and transfer described above are not the only
restrictions on the common shares. We recommend that you examine Statia
Terminals Group's articles for a complete description of all the restrictions on
ownership and transfer of the common shares.
All certificates representing common shares will bear a legend referring to
the restrictions described above, as follows:
THE INTERESTS REPRESENTED BY THIS CERTIFICATE ARE ISSUED, ACCEPTED AND HELD
SUBJECT TO THE TERMS OF THE ARTICLES OF STATIA TERMINALS GROUP, AS THE SAME MAY
BE AMENDED FROM TIME TO TIME (THE "ARTICLES") AND THIS CERTIFICATE. A COPY OF
THE ARTICLES IS AVAILABLE AT THE PRINCIPAL OFFICE OF STATIA TERMINALS GROUP.
OWNERSHIP, SALE, TRANSFER, MORTGAGE, PLEDGE, HYPOTHECATION OR OTHER ENCUMBRANCE
OR DISPOSITION OF THIS CERTIFICATE AND THE INTERESTS REPRESENTED HEREBY ARE
SUBJECT TO RESTRICTIONS SET FORTH IN THE ARTICLES AND THIS CERTIFICATE, AND THE
HOLDER HEREOF, BY THE ACCEPTANCE OF THIS CERTIFICATE, ACKNOWLEDGES NOTICE OF ALL
THE PROVISIONS IN THE ARTICLES AND THIS CERTIFICATE AND AGREES TO BE BOUND
THERETO. OWNERSHIP AND ANY TRANSFER OF THIS CERTIFICATE OR THE SHARES
REPRESENTED HEREBY IN VIOLATION OF THE TERMS OF THE ARTICLES AND THIS
CERTIFICATE SHALL BE PROHIBITED, AND SHALL BE NULL AND VOID AND OF NO FORCE AND
EFFECT TO THE EXTENT, AND INSOFAR AS SET FORTH IN THE ARTICLES AND THIS
CERTIFICATE.
Pursuant to a Netherlands Antilles ordinance, a person who directly or
indirectly acquires shares representing 5% or more of all of our voting
securities must notify us immediately of such acquisition. The board of
directors must publicly announce such notice and distribute it to all
shareholders. Failure to comply with the provisions of this ordinance may result
in the limitation of such shares' voting rights to 5% of all voting securities
and may lead to civil and/or criminal penalties.
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DESCRIPTION OF THE SUBORDINATED SHARES
The subordinated shares are a separate class of shares of Statia Terminals
Group, and the rights of holders of such subordinated shares to participate in
dividends and distributions on liquidation differ from, and are subordinated to,
the rights of the holders of common shares. For any given quarter, any available
cash will first be distributed to the holders of common shares, and then will be
distributed to the holders of subordinated shares depending upon the amount of
available cash for the quarter, the amount of common share arrearages, if any,
and the rights of the holders of incentive rights. Distribution of the first
$6.8 million on the subordinated shares will be deferred as described under
"Cash Distribution Policy--Deferral of Distributions on Subordinated Shares".
CONVERSION OF SUBORDINATED SHARES
The subordination period will generally extend from the closing of this
offering until the tests set forth below have been met for any quarter ending on
or after June 30, 2004 in respect of which:
o distributions of available cash from operating surplus on the common and
subordinated shares with respect to each of the three consecutive
non-overlapping four-quarter periods immediately preceding the date of
determination equaled or exceeded the sum of the target quarterly
distribution on all of the outstanding common and subordinated shares
during such periods;
o the adjusted operating surplus generated during each of the three
consecutive non-overlapping four-quarter periods immediately preceding
the date of determination equaled or exceeded the sum of the target
quarterly distribution on all of the common and subordinated shares that
were outstanding on a fully diluted basis; and
o there are no outstanding common share arrearages.
Prior to the end of the subordination period and to the extent the tests
for conversion described below are satisfied, a portion of the subordinated
shares may be eligible to convert into common shares prior to June 30, 2004.
Subordinated shares will convert into common shares on a one-for-one basis on
the first day after the record date established for the distribution in respect
of any quarter ending on or after (a) June 30, 2002 with respect to one-quarter
of the subordinated shares (950,000 subordinated shares) and (b) June 30, 2003
with respect to one-quarter of the subordinated shares (950,000 subordinated
shares), in respect of which:
o distributions of available cash from operating surplus on the common and
subordinated shares with respect to each of the three consecutive
non-overlapping four-quarter periods immediately preceding the date of
determination equaled or exceeded the sum of the target quarterly
distribution on all of the outstanding common and subordinated shares
during such periods;
o the adjusted operating surplus generated during each of the three
consecutive non-overlapping four-quarter periods immediately preceding
the date of determination equaled or exceeded the sum of the target
quarterly distribution on all of the common and subordinated shares that
were outstanding on a fully diluted basis; and
o there are no outstanding common share arrearages.
The early conversion of the second one-quarter of subordinated shares may not
occur until at least one year following the early conversion of the first one-
quarter of subordinated shares.
Upon expiration of the subordination period, all remaining subordinated
shares will convert into common shares on a one-for-one basis and will
thereafter participate, pro rata, with the other common shares in distributions
of available cash.
DISTRIBUTIONS UPON LIQUIDATION
If Statia Terminals Group liquidates during the subordination period, under
some circumstances holders of outstanding common shares will be entitled to
receive more per share in liquidating distributions than holders of outstanding
subordinated shares. Following conversion of the subordinated shares into common
shares, all common and subordinated shares will be treated the same upon
liquidation of Statia Terminals Group.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering and conversion of the outstanding
subordinated shares into common shares, there will be 11,400,000 common shares
outstanding, or 12,160,000 common shares if the underwriters' over-allotment
option is exercised in full, in each case assuming no exercise of options or
warrants after January 1, 1999. The 7,600,000 common shares being sold in this
offering, or 8,360,000 common shares if the underwriters' over-allotment option
is exercised in full, will be freely tradeable in the U.S. without restriction
under the U.S. Securities Act of 1933, unless such common shares are acquired by
our "affiliates" as defined in Rule 144 under the Securities Act. The 3,800,000
common shares to be outstanding upon conversion of the subordinated shares will
be "restricted securities" as defined in Rule 144 and Rule 701 under the
Securities Act and may not be sold unless they are either registered under the
Securities Act or sold pursuant to an exemption from registration, such as the
exemption provided by Rule 144.
In general, under Rule 144 as currently in effect:
o If one year has elapsed since the later of the date of the acquisition of
the restricted common shares (or the subordinated shares from which they
were converted) from either Statia Terminals Group or any of its
affiliates, the acquiror or subsequent holder thereof may sell, within
any three-month period commencing 90 days after the date of this
prospectus, a number of common shares that does not exceed
(a) the greater of one percent of the then outstanding common shares
(approximately 7,600 common shares immediately after this offering),
or
(b) the average weekly trading volume of the common shares on the Nasdaq
National Market during the four calendar weeks preceding the date on
which notice of the proposed sale is filed with the commission.
o If two years have elapsed since the later of the date of the acquisition
of the restricted common shares, or the subordinated shares from which
they were converted, from Statia Terminals Group or any of its
affiliates, a person who is not deemed to have been an affiliate of
Statia Terminals Group, at any time for 90 days preceding a sale would be
entitled to sell such common shares under Rule 144 without regard to the
volume limitations, manner of sale provisions or notice requirements.
The one-year and two-year periods may in some circumstances include the
holding period of a prior owner. The one-year and two-year holding periods
described above do not begin until the full purchase price or other
consideration is paid by the person acquiring the restricted common shares (or
subordinated shares) from Statia Terminals Group, or one of its affiliates.
Sales under Rule 144 are also subject to particular manner of sale provisions,
notice requirements and the availability of current public information about
Statia Terminals Group.
Pursuant to an agreement between Statia Terminals Group and Statia
Terminals Holdings N.V., Statia Terminals Holdings N.V. has the right to require
Statia Terminals Group to use its best efforts to register up to all of the
subordinated shares and all common shares issuable upon conversion thereof under
the Securities Act. Statia Terminals Holdings N.V. also has some "piggyback"
registration rights to compel the inclusion of such subordinated and common
shares in registration statements filed by Statia Terminals Group under the
Securities Act.
Prior to this offering, there has been no public market for the common
shares. Trading of the common shares on the Nasdaq National Market is expected
to commence immediately following completion of this offering. No prediction can
be made as to the effect, if any, that future sales of common shares or the
availability of common shares for future sale, will have on the market price
prevailing from time to time. Sales of substantial amounts of common shares,
including common shares issued upon conversion of the subordinated shares, or
the perception that such sales could occur, could adversely affect prevailing
market prices of the common shares.
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TAXATION
NETHERLANDS ANTILLES TAXATION
In the opinion of PricewaterhouseCoopers, special Netherlands Antilles tax
advisor to Statia Terminals Group the following is a description of the
principal Netherlands Antilles tax consequences relating to the ownership and
disposition of the common shares. Under the laws of the Netherlands Antilles as
currently in effect, a holder of common shares who is not a resident or deemed a
resident of, and during the taxable year has not engaged in trade or business
through a permanent establishment, permanent representative or agent in, the
Netherlands Antilles will not be subject to Netherlands Antilles income tax on
distributions made with respect to the common shares or on gains realized during
that year on sale or disposal of such shares; the Netherlands Antilles do not
impose a withholding tax on distributions made by Statia Terminals Group. There
are no gift or inheritance taxes levied by the Netherlands Antilles when at the
time of such gift or at the time of death, the relevant holder of common shares
was not domiciled or deemed domiciled in the Netherlands Antilles. A person is
not deemed a resident or deemed domiciled in the Netherlands Antilles merely on
the basis of being a holder of common shares.
U.S. FEDERAL INCOME TAXATION
In the opinion of White & Case LLP, special U.S. tax counsel to Statia
Terminals Group, the following is a description of the principal U.S. federal
income tax consequences relating to the ownership and disposition of the common
shares. This description is based on (1) the Internal Revenue Code of 1986, as
amended (the "Code"), (2) income tax regulations, proposed and final, issued
under the Code and (3) administrative and judicial interpretations of the Code
and regulations, each as in effect and available on the date of this prospectus.
These income tax laws, regulations, and interpretations, however, may
change at any time, and any change could be retroactive to the date of this
prospectus. These income tax laws and regulations are also subject to various
interpretations, and the Internal Revenue Service or the courts could later
disagree with the explanations or conclusions contained in this description.
This description deals only with the U.S. federal income tax considerations
of holders that are initial purchasers of the common shares and that will hold
common shares as capital assets, as defined in the Code. We do not, however,
address all of the tax consequences that may be relevant to a holder of common
shares.
A "United States Holder" is a beneficial owner of common shares, who for
U.S. federal income tax purposes is:
o a citizen or resident of the U.S.;
o a partnership or corporation created or organized in or under the laws of
the U.S. or any state thereof, including the District of Columbia;
o an estate if its income is subject to U.S. federal income taxation
regardless of its source; or
o a trust if such trust validly has elected to be treated as a United
States person for U.S. federal income tax purposes or if (1) a U.S. court
can exercise primary supervision over its administration, and (2) one or
more United States persons have the authority to control all of its
substantial decisions.
A "Non-United States Holder" is a beneficial owner of common shares other
than a United States Holder.
We also do not address, except as stated below, any of the tax consequences
to (1) holders of common shares that may be subject to special tax treatment
such as financial institutions, real estate investment trusts, tax-exempt
organizations, regulated investment companies, insurance companies, and brokers
and dealers or traders in securities or currencies, (2) persons who acquired
common shares pursuant to an exercise of employee stock options or rights or
otherwise as compensation, (3) persons whose functional currency is not the U.S.
dollar, (4) persons that
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hold or will hold common shares as part of a position in a straddle or as part
of a hedging or conversion transaction and (5) holders of common shares that
own, or are deemed to own, 10% or more, by voting power or value, of the
outstanding stock of Statia Terminals Group.
Further, we do not address any state, local or foreign tax consequences
relating to the ownership and disposition of the common shares.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE OWNERSHIP AND
DISPOSITION OF THE COMMON SHARES AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS.
UNITED STATES HOLDERS
DISTRIBUTIONS
If you are a United States Holder, the gross amount of any distribution to
you by Statia Terminals Group with respect to common shares will be includible
in your income as dividend income to the extent such distribution is paid out of
the current or accumulated earnings and profits of Statia Terminals Group as
determined under U.S. federal income tax principles. Such distribution will not
be eligible for the dividends received deduction generally allowed to corporate
United States Holders. To the extent that the amount of any distribution by
Statia Terminals Group exceeds its current and accumulated earnings and profits
as determined under U.S. federal income tax principles, it will be treated first
as a tax-free return of your adjusted tax basis in the common shares and
thereafter as capital gain.
CONSTRUCTIVE DISTRIBUTIONS
In the event of any combination or subdivision of the common shares,
whether effected by a distribution payable in common shares or otherwise, but
not by reason of the issuance of additional common shares for cash or property,
the target quarterly distribution, the additional distribution levels, the
unrecovered initial price, the amount of common shares issuable upon conversion
of the subordinated shares, and some other amounts are all subject to
adjustment. Although Statia Terminals Group expects that any such adjustments
will be made to avoid its application, Section 305 of the Code and the income
tax regulations thereunder may treat a United States Holder as having received a
constructive distribution from Statia Terminals Group, resulting in dividend
income to the extent of Statia Terminals Group's current and accumulated
earnings and profits, but only to the extent that any such adjustments increase
the United States Holder's proportionate interest in the assets or earnings and
profits of Statia Terminals Group.
TAXES WITHHELD ON DISTRIBUTIONS
Distributions received by you with respect to common shares will be treated
as foreign source income, which may be relevant in calculating your foreign tax
credit limitation. Subject to certain conditions and limitations, any
Netherlands Antilles' tax withheld on distributions may be deducted from your
taxable income or credited against your U.S. federal income tax liability. The
limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. For this purpose, distributions by Statia
Terminals Group generally will constitute passive income or, in the case of some
United States Holders, financial services income.
SALE OR EXCHANGE OF COMMON SHARES
If you are a United States Holder, generally you will recognize gain or
loss on the sale or exchange of common shares equal to the difference between
the amount realized on such sale or exchange and your adjusted tax basis in the
common shares. Your adjusted tax basis in the common shares will equal the
amount you paid for the common shares reduced by the amount of any distributions
you received on such common shares that are treated as a tax-free return of your
basis. Such gain or loss will be capital gain or loss. If you are a
non-corporate United States Holder, generally the maximum U.S. federal income
tax rate applicable to such gain will be lower than the maximum U.S. federal
income tax rate applicable to ordinary income if your holding period for such
common shares exceeds one year. For example, generally the maximum rate
applicable to ordinary income in 1999 for a United States Holder who is an
individual would be 39.6%, whereas, generally, net capital gains of such a
holder from the disposition of common shares held for more than one year at the
time of disposition would be subject to a maximum rate of 20%. Any gain
recognized by you generally will be treated as U.S. source income for U.S.
foreign tax credit purposes. The
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deductibility of capital losses is subject to limitations.
SPECIAL TAX RULES
PASSIVE FOREIGN INVESTMENT
COMPANY CONSIDERATIONS
A non-U.S. corporation will be classified as a passive foreign investment
company (a "PFIC") for U.S. federal income tax purposes in any taxable year in
which, after applying look-through rules, either (1) at least 75% of its gross
income is passive income, or (2) on average at least 50% of the gross value of
its assets is attributable to assets that produce passive income or are held for
the production of passive income. Passive income for this purpose generally
includes dividends, interest, royalties, rents and gains from commodities and
securities transactions.
Based on its estimated gross income, the average value of its gross assets
and the nature of its business, Statia Terminals Group believes that it will not
be classified as a PFIC for its current taxable year. Statia Terminals Group's
status in future years will depend on its assets and activities in those years.
Statia Terminals Group has no reason to believe that its assets or activities
will change in a manner that would cause it to be classified as a PFIC. If
Statia Terminals Group were a PFIC, a United States Holder of common shares
generally would be subject to imputed interest charges and other disadvantageous
tax treatment with respect to any gain from the sale or exchange of, and some
distributions with respect to, the common shares.
CONTROLLED FOREIGN CORPORATION
CONSIDERATIONS
A non-U.S. corporation will be classified as a controlled foreign
corporation (a "CFC") for U.S. federal income tax purposes in any taxable year
of such corporation in which more than 50% of either (1) the total combined
voting power of all classes of stock of such corporation entitled to vote, or
(2) the total value of the stock of such corporation is owned or considered
owned, on any day during such taxable year, by United States persons who own or
are considered to own 10% or more of the total combined voting power of all
classes of stock entitled to vote of such corporation ("Ten Percent
Shareholders"). The CFC rules provide that, even if the CFC has made no
distributions to its shareholders, each Ten Percent Shareholder of a CFC is
required to include in income each year such Ten Percent Shareholder's pro rata
share of the CFC's Subpart F income and investment of earnings in U.S. property.
Although Statia Terminals Group currently is a CFC, Statia Terminals Group
expects that, as a result of the offering, it will not be classified as a CFC.
In addition, Statia Terminals Group's articles contain provisions primarily
adopted to prevent becoming, or minimize the duration as, a CFC and to prevent
any ownership or transfer of the common shares which may result in such
classification.
NON-UNITED STATES HOLDERS
DISTRIBUTIONS
If you are a Non-United States Holder of common shares, generally you will
not be subject to U.S. federal income or withholding tax on distributions
received on common shares, unless such income is effectively connected with the
conduct by you of a trade or business in the U.S.
SALE OR EXCHANGE OF COMMON SHARES
If you are a Non-United States Holder of common shares, generally you will
not be subject to U.S. federal income or withholding tax on any gain realized on
the sale or exchange of such shares unless (1) such gain is effectively
connected with the conduct by you of a trade or business in the U.S. or (2) in
the case of any gain realized by an individual, you are present in the U.S. for
183 days or more in the taxable year of such sale or exchange and some other
conditions are met.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING REQUIREMENTS
U.S. backup withholding tax and information reporting requirements
generally apply to some payments to particular non-corporate holders of stock.
Information reporting generally will apply to payments of distributions on, and
to proceeds from the sale or redemption of, common shares by a payor within the
U.S. to a holder of common shares other than an exempt recipient. Exempt
recipients include corporations, payees that are Non-United States Holders that
provide an appropriate certification and some other persons. A payor within the
U.S. will be required to withhold 31% of any payments of the proceeds from the
sale or redemption of common shares within the U.S. to
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<PAGE>
you, unless you are an exempt recipient, if you fail to furnish your correct
taxpayer identification number or otherwise fail to comply with such backup
withholding tax requirements.
Income tax regulations issued on October 6, 1997, and amended on
December 30, 1998, would modify some of the rules discussed above generally with
respect to payments on common shares made after December 31, 1999. In
particular, a payor within the U.S. will be required to withhold 31% of any
payments of distributions on, or proceeds from the sale of, common shares within
the U.S. to you, unless you are an exempt recipient, if you fail to furnish your
correct taxpayer identification number or otherwise fail to comply with, or
establish an exemption from, such backup withholding tax requirements. In the
case of such payments by a payor within the U.S. to a foreign partnership, other
than payments to a foreign partnership that qualifies as a withholding foreign
partnership within the meaning of such income tax regulations and payments to a
foreign partnership that are effectively connected with the conduct of a trade
or business in the U.S., the partners of such partnership will be required to
provide the certification discussed above in order to establish an exemption
from backup withholding tax and information reporting requirements. Moreover, a
payor may rely on a certification provided by a Non-United States Holder only if
such payor does not have actual knowledge or a reason to know that any
information or certification stated in such certificate is unreliable.
THE ABOVE DESCRIPTION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF
ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP AND DISPOSITION OF COMMON SHARES.
PROSPECTIVE PURCHASERS OF COMMON SHARES ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS, AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE
LAWS OF ANY FOREIGN, STATE, LOCAL OR OTHER TAXING JURISDICTION.
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PLAN OF DISTRIBUTION
Upon the terms and subject to the conditions stated in the underwriting
agreement dated , 1999, Statia Terminals Group has agreed to sell to each
of the underwriters named below, and each of the underwriters has severally
agreed to purchase from Statia Terminals Group, the number of common shares set
forth opposite its name below:
<TABLE>
<CAPTION>
Number of
Underwriter Common Shares
- ------------------------------------- -------------
<S> <C>
Bear, Stearns & Co. Inc.
Morgan Stanley & Co. Incorporated
Prudential Securities Incorporated
Dain Rauscher Wessels
a division of Dain Rauscher
Incorporated
---------
Total 7,600,000
---------
---------
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the common shares offered hereby
are subject to approval of certain legal matters by their counsel and to some
other conditions. The underwriters are obligated to take and pay for all common
shares offered hereby, other than those covered by the underwriters' over-
allotment option described below, if any such common shares are taken.
The following table shows the per share and total underwriting discounts
and commissions to be paid by us to the underwriters. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares
<TABLE>
<CAPTION>
PAID BY STATIA
TERMINALS GROUP
-----------------
NO EXERCISE FULL EXERCISE
----------------- -------------
<S> <C> <C>
Per common share... $ $
Total.............. $ $
</TABLE>
The underwriters propose to offer part of the common shares directly to the
public at the offering price set forth on the cover page of this prospectus and
part of such common shares to particular dealers at such price less a concession
not in excess of $ per common share. The underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per common share to other
underwriters or to some other dealers. After the initial offering of the common
shares to the public, the offering price and other selling terms may from time
to time be varied by the underwriters. The underwriters have informed us that
they do not intend to confirm sales to accounts over which they exercise
discretionary authority.
Statia Terminals Group has granted to the underwriters an option,
exercisable for 30 days from the date of this prospectus, to purchase up to
760,000 additional common shares at the initial public offering price set forth
on the cover page of this prospectus, minus the underwriting discounts and
commissions. The underwriters may exercise such option solely for the purpose of
covering over-allotments, if any, made in connection with the offering of the
common shares offered hereby. To the extent such option is exercised, each
underwriter will be obligated, subject to conditions, to purchase approximately
the same percentage of such additional common shares as the number of common
shares set forth opposite such underwriter's name in the preceding table bears
to the total number of common shares listed in such table.
In addition, some persons participating in this offering may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common shares during and after this offering. For instance, the underwriters may
over-allot or otherwise create a short position in the common shares for their
own account by selling more common shares than have been sold to them by Statia
Terminals Group. The underwriters may then elect to cover any such short
position by purchasing common shares in the open market or by exercising the
over-allotment options granted to the underwriters. In addition, such persons
may stabilize or maintain the price of the common shares by bidding for or
purchasing common shares in the open market and may impose penalty bids, under
which selling concessions allowed to syndicate members or other broker-dealers
participating in this offering are reclaimed if shares previously distributed in
this offering are
88
<PAGE>
repurchased in connection with stabilization transactions or otherwise. The
effect of these transactions may be to stabilize or maintain the market price of
the common shares at a level above that which might otherwise prevail in the
open market. The imposition of a penalty bid may also affect the price of the
common shares to the extent that it discourages resales thereof. No
representation is made as to the magnitude or effect of any such stabilization
or other transactions. Such transactions, if commenced, may be discontinued at
any time.
Statia Terminals Group and its affiliates and the officers and directors of
Statia Terminals Group and its affiliates have agreed as follows:
o they will not, pursuant to an effective registration statement under the
Securities Act, offer, sell, contract to sell or otherwise dispose of any
common or subordinated shares, any securities that are convertible into,
or exercisable or exchangeable for, or that represent the right to
receive, common or subordinated shares or any securities that are senior
to or pari passu with common shares; or
o Statia Terminals Group will not register any subordinated shares under
the Securities Act, purchase any subordinated shares or grant any options
or warrants to purchase common shares
in each case for a period of 180 days after the date of this prospectus, without
the prior written consent of Bear, Stearns & Co. Inc. and Morgan Stanley & Co.
Incorporated, except for issuances of common shares in connection with some
acquisitions or capital improvements that are accretive on a per common or
subordinated share basis or pursuant to employee benefit plans.
Prior to this offering, there has been no public market for the common
shares of Statia Terminals Group. Consequently, the initial public offering
price has been determined by negotiations between Statia Terminals Group and the
underwriters. Among the factors considered in determining the initial public
offering price were the history of and prospects for our business and the
industry in which we compete, an assessment of our management and the present
state of our development, our past and present revenues, earnings and cash
flows, the prospects for growth of our revenues, earnings and cash flows, the
current state of the U.S. economy and the current level of economic activity in
the industry in which we compete and in related or comparable industries, and
currently prevailing conditions in the securities markets, including current
market valuations of publicly traded companies which are comparable to us.
We estimate that the total fees and expenses of this offering, excluding
underwriting discounts and commissions, will be approximately $5.1 million. This
amount includes a financial advisory fee of $1.5 million that we have agreed to
pay to Bear, Stearns & Co. Inc. in connection with the restructuring described
herein. In addition, some of the underwriters may from time-to-time perform
investment banking and other financial services for Statia Terminals Group and
its affiliates for which they may receive advisory or transaction fees, as
applicable, plus out-of-pocket expenses, of the nature and in amounts customary
in the industry for such services.
Statia Terminals Group has agreed to indemnify the underwriters against
some civil liabilities, including liabilities under the Securities Act.
89
<PAGE>
EXPERTS
The consolidated financial statements of Statia Terminals Group and its
subsidiaries as of December 31, 1997 and 1998 and for the period from
January 1, 1996 through November 27, 1996, the period from inception through
December 31, 1996 and the years ended December 31, 1997 and 1998, included in
this prospectus have been audited by Arthur Andersen LLP, independent certified
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
The opinion set forth under "Taxation--Netherlands Antilles Taxation"
referred to in this prospectus and elsewhere in the registration statement has
been rendered by PricewaterhouseCoopers (Netherlands Antilles), independent
public accountants, and has been referred to herein in reliance upon the
authority of such firm as experts in giving said opinion.
LEGAL MATTERS
The validity of the issuance of the common shares offered hereby will be
passed upon for Statia Terminals Group by Smeets Thesseling van Bokhorst Spigt,
Curacao, Netherlands Antilles, with respect to Netherlands Antilles law.
Some legal matters in connection with this offering will be passed upon for
Statia Terminals Group by White & Case LLP, New York, New York. A partner at
White & Case LLP, through his interest in a holding company, beneficially owns
93.75 shares of Statia Terminals Group's currently outstanding common stock and
93.75 shares of its currently outstanding Series E Preferred Stock.
Some legal matters in connection with this offering will be passed upon for
the underwriters by Andrews & Kurth L.L.P., New York, New York.
ENFORCEABILITY OF CERTAIN
CIVIL LIABILITIES
Our Netherlands Antilles counsel, Smeets Thesseling van Bokhorst Spigt,
Curacao, has advised us as to risks relating to the enforceability of particular
civil liabilities under the U.S. federal securities laws and related foreign
judgments by courts of the Netherlands Antilles. Our Canadian counsel, Stewart
McKelvey Stirling Scales, has advised us as to risks relating to the
enforceability of such civil liabilities and foreign judgments by courts of the
Province of Nova Scotia. For a detailed discussion of these risks, see "Risk
Factors--You may not be able to sue us effectively in the Netherlands Antilles
or Canada."
Statia Terminals Group has appointed CT Corporation System, 1633 Broadway,
New York 10019 as its agent for service of process in the United States.
AVAILABLE INFORMATION
Statia Terminals Group has filed with the Securities and Exchange
Commission a registration statement on Form S-1 (together with all amendments,
exhibits, schedules and supplements thereto, the "registration statement") under
the Securities Act and the rules and regulations thereunder, for the
registration of the common shares offered through this prospectus. This
prospectus, which forms a part of the registration statement, does not contain
all the information set forth in the registration statement, certain parts of
which have been omitted as permitted by the commission rules and regulations.
Statements made in this prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete. Where such contract or
other document is an exhibit to the registration statement, each such statement
is qualified in all respects by the provisions of such exhibit, to which
reference is hereby made.
The registration statement may be inspected and copied at the public
reference facilities maintained by the commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the following
regional offices of the commission: Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can be obtained by mail
from the Public Reference Section of the commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 at prescribed rates. Electronic
registration statements filed through the Electronic Data Gathering Analysis and
Retrieval system are publicly available through the commission's web site at
http://www.sec.gov. All amendments thereto and subsequent periodic reports
required to be filed under the Securities Exchange Act of 1934, as amended, have
been and will be filed through EDGAR.
90
<PAGE>
Although Statia Terminals Group is not subject to the periodic reporting
and other informational requirements of the Exchange Act, two of Statia
Terminals Group's subsidiaries, Statia Terminals International and Statia
Terminals Canada jointly file (as co-issuers of the mortgage notes) reports and
other information with the commission in accordance therewith. Such reports and
information may be inspected and copied at the public reference facilities
referred to above or obtained from the address or web sites specified above.
91
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APPENDIX A
GLOSSARY OF OFFERING TERMS
<TABLE>
<S> <C>
Acquisition.......................... Any transaction in which we acquire (through an asset acquisition, merger,
stock acquisition or other form of investment) control over all or a
portion of the assets, properties or business of another person for the
purpose of increasing our operating capacity or revenues over our
operating capacity or revenues existing immediately prior to such
transaction.
Adjusted operating surplus........... For any period, operating surplus generated during that period as adjusted
to:
(a) decrease operating surplus by:
(1) any net increase in working capital borrowings during that period, and
(2) any net reduction in cash reserves for operating expenditures during
that period not relating to an operating expenditure made during that
period; and
(b) increase operating surplus by;
(1) any net decrease in working capital borrowings during that period, and
(2) any net increase in cash reserves for operating expenditures during
that period required by any debt instrument for the repayment of
principal, interest or premium.
Adjusted operating surplus does not include that portion of operating
surplus included in clause (a)(1) of the definition of operating surplus.
Available cash....................... For any quarter prior to liquidation, available cash means:
(a) the sum of:
(1) all of our cash and cash equivalents on hand at the end of that
quarter, and
(2) all of our additional cash and cash equivalents on hand on the date of
determination of available cash for that quarter resulting from
working capital borrowings made after the end of that quarter;
less
(b) the amount of any cash reserves necessary or appropriate in the
reasonable discretion of our board of directors to:
(1) provide for the proper conduct of our business, including reserves for
future capital expenditures and for our anticipated future credit
needs, after that quarter,
(2) provide funds for target quarterly distributions and cumulative common
share arrearages for any one or more of the next four quarters, or
(3) comply with applicable law or any loan agreement, security agreement,
mortgage, debt instrument or other agreement or obligation to which we
are a party or by which we are bound or our assets are subject.
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
Our board of directors may not establish cash reserves pursuant to (2)
above if the effect of those reserves would be that we are unable to
distribute the target quarterly distribution on all common shares, plus
any cumulative common share arrearage on all common shares for that
quarter; and disbursements made by us or cash reserves established,
increased or reduced after the end of that quarter but on or before the
date of determination of available cash for that quarter shall be deemed
to have been made, established, increased or reduced for purposes of
determining available cash within that quarter if our board of directors
so determines. However, "available cash" for the quarter in which our
liquidation occurs and any quarter after that will equal zero.
Capital improvements................. Additions or improvements to the capital assets owned by us or the
acquisition of existing, or the construction of new, capital assets
(including terminaling and storage facilities and related assets), in each
case made to increase our operating capacity or revenues existing
immediately prior to that addition, improvement, acquisition or
construction.
Interim capital transactions......... The following transactions, if they occur prior to liquidation, are
interim capital transactions:
o our borrowings or refinancings of indebtedness and sales of debt
securities (other than working capital borrowings and other than for
items purchased on open account in the ordinary course of business);
o sales of equity interests by us, other than the common shares sold to
the underwriters of the initial public offering of the common shares for
the exercise of their over-allotment option; and
o sales or other voluntary or involuntary dispositions of our assets,
except for sales or other dispositions of:
(a) inventory in the ordinary course of business,
(b) accounts receivable and other assets in the ordinary course of
business, and
(c) assets as a part of normal retirements or replacements.
Operating expenditures............... All expenditures, including, but not limited to, taxes, debt service
payments and capital expenditures, are operating expenditures, except
payments or prepayments of principal and premium on indebtedness if the
payment is:
o required in connection with the sale or other disposition of assets; or
o made in connection with the refinancing or refunding of indebtedness
with the proceeds from new indebtedness or from the sale of equity
interests.
At the election and in the reasonable discretion of our board of
directors, any payment of principal or premium will be deemed to be
refunded or refinanced by any indebtedness incurred or to be incurred by
us within 180 days before or after that payment to the extent of the
principal amount of that indebtedness.
Operating expenditures do not include:
o capital expenditures made for acquisitions or for capital improvements;
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C>
o payment of transaction expenses relating to interim capital
transactions; or
o distributions.
Where capital expenditures are made partially for acquisitions or capital
improvements and partially for other purposes, our board of directors'
good faith allocation between the amounts paid for each will be
conclusive.
Operating surplus.................... For any period prior to liquidation on a cumulative basis, operating
surplus is:
(a) the sum of:
(1) $7.5 million,
(2) any net positive working capital on hand as of the close of business
on the closing of this offering,
(3) all cash receipts for the period beginning on the closing of this
offering and ending on last day of that period, other than cash
receipts from interim capital transactions, and
(4) all cash receipts after the end of that period but on or before the
date of determination of operating surplus for that period resulting
from working capital borrowings;
less
(b) the sum of:
(1) operating expenditures for the period beginning on the closing of this
offering and ending with the last day of that period, and
(2) the amount of cash reserves that is necessary or advisable in the
reasonable discretion of our board of directors to provide funds for
future operating expenditures.
Disbursements made or cash reserves established, increased or reduced
after the end of this period but on or before the date of determination of
available cash for this period will be deemed to have been made,
established, increased or reduced for purposes of determining operating
surplus within this period if our board of directors so determines.
However, "operating surplus" for the quarter in which the liquidation
occurs and any subsequent quarter will be equal to zero.
Unrecovered initial price............ At any time, the unrecovered initial price of a common share is the
initial price of that share, after:
o subtracting all distributions from interim capital transactions made on
that common share;
o subtracting any distributions of cash made in connection with our
dissolution and liquidation made on that common share; and
o adjusting this price as our board of directors determined is needed to
reflect any distribution, subdivision or combination of the common
shares.
Working capital borrowings........... Working capital borrowings are borrowings made exclusively for working
capital purposes and made pursuant to a credit facility or other
arrangement that requires all borrowings under that arrangement to be
reduced to a relatively small amount each year for an economically
meaningful period of time.
</TABLE>
A-3
<PAGE>
APPENDIX B
PRO FORMA AVAILABLE CASH FROM OPERATING SURPLUS
The following table shows the calculation of pro forma available cash from
operating surplus and should be read in conjunction with Statia Terminals
Group's consolidated financial statements and Statia Terminals Group's unaudited
pro forma consolidated condensed financial statements.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
(UNAUDITED)
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Pro forma net income....................................................................... $ 9,698
Add: Provision for income taxes............................................................ 320
Depreciation(a)...................................................................... 10,213
Interest expense and amortization.................................................... 12,651
--------
Earnings before interest expense, income taxes, depreciation and amortization (EBITDA)..... 32,882
Add: Non-cash charges(b)................................................................... 324
Less: Maintenance capital expenditures(c).................................................. (8,854)
Pro forma payment for interest....................................................... (11,792)
Pro forma payment for taxes.......................................................... (369)
--------
Pro forma available cash from operating surplus............................................ $ 12,191
--------
--------
</TABLE>
(a) Reflects historical depreciation for Statia Terminals Group less the
historical depreciation for Statia Terminals Southwest, Inc.
(b) Reflects compensation expense related to issuance of stock options.
(c) Represents the actual level of maintenance capital expenditures less actual
maintenance capital expenditures for Statia Terminals Southwest. We estimate
that our maintenance capital expenditures will average approximately
$7.0 million over each of the next three years. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Capital
Expenditures".
(d) The pro forma adjustments in the unaudited pro forma financial statements
are based upon currently available information and particular estimates and
assumptions. The unaudited pro forma consolidated condensed financial
statements do not purport to present our financial position or results of
operations had the transactions to be effected at the closing of this
offering actually been completed as of the date indicated. The amount of pro
forma available cash from operating surplus shown above should only be
viewed as a general indication of the amounts of available cash from
operating surplus that may have been generated by us had the transactions
occurred in earlier periods.
(e) The amount of available cash from operating surplus needed to make the
target quarterly distribution for four quarters on the common and
subordinated shares to be outstanding immediately after this offering will
be $20.5 million (approximately $13.7 million for the common shares and
approximately $6.8 million for the subordinated shares). The pro forma
amounts reflected above would not have been sufficient to cover the target
quarterly distribution during the year ended December 31, 1998 on all of the
common and the subordinated shares.
The amount of available cash from operating surplus needed to distribute the
target quarterly distribution for four quarters on the common and
subordinated shares to be outstanding immediately after this offering,
assuming the underwriters exercise their over-allotment option in full, will
be $21.8 million (approximately $15.0 million for the common shares and
approximately $6.8 million for the subordinated shares). The pro forma
amounts reflected above would not have been sufficient to cover the target
quarterly distribution during the year ended December 31, 1998 on all of the
common and the subordinated shares.
B-1
<PAGE>
INDEX TO
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Certified Public Accountants......................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and December 31, 1998.................................. F-3
Consolidated Statements of Income (Loss) for the period from January 1, 1996 through November 27, 1996,
the period from Inception to December 31, 1996, the year ended December 31, 1997 and the year ended
December 31, 1998........................................................................................ F-4
Consolidated Statements of Stockholders' Equity for the period from Inception to December 31, 1996, the
year ended December 31, 1997 and the year ended December 31, 1998........................................ F-5
Consolidated Statements of Cash Flows for the period from January 1, 1996 through November 27, 1996, the
period from Inception to December 31, 1996, the year ended December 31, 1997 and the year ended
December 31, 1998........................................................................................ F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Managing Directors of
Statia Terminals Group N.V. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Statia Terminals
Group N.V. (a Netherlands Antilles corporation) and Subsidiaries (the "Company")
as of December 31, 1997 and 1998, and the related consolidated statements of
income (loss), stockholders' equity and cash flows for the period from Inception
through December 31, 1996 and for the years ended December 31, 1997 and 1998. We
have also audited the related combined statements of income (loss) and cash
flows of Statia Terminals, Inc. and Subsidiaries and Affiliates (the
"Predecessor Company") for the period from January 1, 1996 through November 27,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from Inception through December 31, 1996 and for the years ended
December 31, 1997 and 1998 and the results of operations and cash flows of the
Predecessor Company for the period from January 1, 1996 through November 27,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
February 1, 1999
F-2
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................... $ 6,113 $ 14,061
Accounts receivable--
Trade, less allowance for doubtful accounts of $830 and $785
in 1997 and 1998, respectively....................................................... 10,092 7,562
Other................................................................................... 2,348 2,328
Inventory, net.......................................................................... 1,247 4,528
Prepaid expenses........................................................................ 1,489 1,417
-------- --------
Total current assets............................................................... 21,289 29,896
PROPERTY AND EQUIPMENT, net............................................................... 218,529 209,970
OTHER NONCURRENT ASSETS, net.............................................................. 6,661 5,744
-------- --------
Total assets....................................................................... $246,479 $245,610
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................................................................ $ 7,732 $ 9,306
Accrued interest payable................................................................ 2,027 2,027
Other accrued expenses.................................................................. 11,099 15,946
-------- --------
Total current liabilities.......................................................... 20,858 27,279
LONG-TERM DEBT............................................................................ 135,000 135,000
-------- --------
Total liabilities.................................................................. 155,858 162,279
REDEEMABLE PREFERRED STOCK:
Series A, $0.10 par value, 20,000 shares authorized, issued and outstanding.......... $ 20,000 $ 20,000
Series B, $0.10 par value, 10,000 shares authorized, issued and outstanding.......... 10,000 10,000
Series C, $0.10 par value, 10,000 shares authorized, issued and outstanding.......... 10,000 10,000
STOCKHOLDERS' EQUITY:
Preferred stock--
Series D, $0.10 par value, 20,000 shares authorized and issued,
20,000 shares outstanding at December 31, 1997,
13,850 shares outstanding at December 31, 1998..................................... 20,000 13,850
Series E, $0.10 par value, 209,500 shares authorized, 41,000 shares issued,
41,000 shares outstanding at December 31, 1997 and
40,974 shares outstanding at December 31, 1998..................................... 41,000 40,974
-------- --------
Total preferred stock.............................................................. 61,000 54,824
Notes receivable from stockholders...................................................... (1,500) (1,474)
Common stock, $0.10 par value, 100,500 shares authorized, 41,000 shares issued and
outstanding at December 31, 1997, 40,794 shares outstanding at December 31, 1998..... 4 4
Additional paid-in-capital.............................................................. -- 363
Accumulated deficit..................................................................... (8,883) (10,386)
-------- --------
Total stockholders' equity......................................................... 50,621 43,331
-------- --------
Total liabilities and stockholders' equity.............................................. $246,479 $245,610
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(DOLLARS IN THOUSANDS)
The Financial Statements of the Company and the Predecessor Company
are not comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
THE COMPANY
PREDECESSOR ----------------------------------------------
COMPANY PERIOD FROM
----------------- INCEPTION
JANUARY 1, 1996 THROUGH YEAR ENDED DECEMBER 31,
THROUGH DECEMBER 31, ------------------------------
NOVEMBER 27, 1996 1996 1997 1998
----------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
REVENUES................................................. $ 140,998 $ 14,956 $142,499 $136,762
COST OF SERVICES AND PRODUCTS SOLD....................... 129,915 12,803 122,939 106,688
--------- -------- -------- --------
Gross profit......................................... 11,083 2,153 19,560 30,074
ADMINISTRATIVE EXPENSES.................................. 8,282 664 7,735 9,500
--------- -------- -------- --------
Operating income..................................... 2,801 1,489 11,825 20,574
LOSS (GAIN) ON DISPOSITION OF PROPERTY AND EQUIPMENT..... (68) -- (109) 1,652
INTEREST EXPENSE......................................... 4,187 1,613 16,874 16,851
INTEREST INCOME.......................................... 57 40 555 684
--------- -------- -------- --------
Income (loss) before provision for income taxes and
preferred stock dividends.......................... (1,261) (84) (4,385) 2,755
PROVISION FOR INCOME TAXES............................... 629 132 780 320
--------- -------- -------- --------
Income (loss) before preferred stock dividends....... (1,890) (216) (5,165) 2,435
PREFERRED STOCK DIVIDENDS................................ 792 306 3,196 3,938
--------- -------- -------- --------
Net income (loss) available to common stockholders... $ (2,682) $ (522) $ (8,361) $ (1,503)
--------- -------- -------- --------
--------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED PREFERRED NOTES
STOCK--SERIES D STOCK--SERIES E RECEIVABLE COMMON STOCK ADDITIONAL
---------------- ---------------- FROM --------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT STOCKHOLDERS SHARES AMOUNT CAPITAL DEFICIT
------ ------- ------ ------- ------------ ------ ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common and
preferred stock, November 27,
1996......................... 20,000 $20,000 41,000 $41,000 $ (1,500) 41,000 $4 $ -- $ --
Net income (loss) available to
common stockholders.......... -- -- -- -- -- -- -- -- (522)
------ ------- ------ ------- -------- ------ -- ---- ---------
BALANCE, December 31, 1996..... 20,000 20,000 41,000 41,000 (1,500) 41,000 4 -- (522)
Net income (loss) available to
common stockholders.......... -- -- -- -- -- -- -- -- (8,361)
------ ------- ------ ------- -------- ------ -- ---- ---------
BALANCE, December 31, 1997..... 20,000 20,000 41,000 41,000 (1,500) 41,000 4 -- (8,883)
Net income (loss) available to
common stockholders.......... -- -- -- -- -- -- -- -- (1,503)
Compensation expense related to
issuance of options.......... -- -- -- -- -- -- -- 363 --
Retirement of preferred
stock........................ (6,150) (6,150) -- -- -- -- -- -- --
Other.......................... -- -- (26) (26) 26 (26) -- -- --
------ ------- ------ ------- -------- ------ -- ---- ---------
BALANCE, December 31, 1998..... 13,850 $13,850 40,974 $40,974 $ (1,474) 40,974 $4 $363 $ (10,386)
------ ------- ------ ------- -------- ------ -- ---- ---------
------ ------- ------ ------- -------- ------ -- ---- ---------
<CAPTION>
TOTAL
-------
<S> <C>
Issuance of common and
preferred stock, November 27,
1996......................... $59,504
Net income (loss) available to
common stockholders.......... (522)
-------
BALANCE, December 31, 1996..... 58,982
Net income (loss) available to
common stockholders.......... (8,361)
-------
BALANCE, December 31, 1997..... 50,621
Net income (loss) available to
common stockholders.......... (1,503)
Compensation expense related to
issuance of options.......... 363
Retirement of preferred
stock........................ (6,150)
Other.......................... --
-------
BALANCE, December 31, 1998..... $43,331
-------
-------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
The Financial Statements of the Company and the Predecessor Company
are not comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
----------------- THE COMPANY
POST PRAXAIR -----------------------------------
ACQUISITION PERIOD FROM
----------------- INCEPTION YEAR ENDED
JANUARY 1, 1996 THROUGH DECEMBER 31,
THROUGH DECEMBER 31, -------------------
NOVEMBER 27, 1996 1996 1997 1998
----------------- ------------ ------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) before preferred stock dividends.............. $ (1,890) $ (216) $(5,165) $ 2,435
Adjustments to reconcile net income (loss) before preferred
stock dividends to net cash provided by operating
activities:
Depreciation, amortization, and noncash charges........... 12,296 1,011 10,911 12,383
Provision for bad debts................................... 406 -- 11 72
Loss (gain) on disposition of property and equipment...... (68) -- (109) 1,652
(Increase) decrease in accounts receivable--trade......... (1,585) (1,311) 2,060 2,458
(Increase) decrease in other accounts receivables......... 3,237 (1,530) 747 20
(Increase) decrease in inventory.......................... (5,033) 1,950 3,722 (3,281)
(Increase) decrease in prepaid expense.................... (64) (809) (453) 72
(Increase) decrease in other noncurrent assets............ 319 (2) (123) 6
Increase (decrease) in accounts payable................... 3,577 283 (2,202) 1,574
Increase (decrease) in accrued expenses................... (811) 2,859 371 799
Increase (decrease) in payable to affiliates.............. (1,276) -- -- --
--------- ---------- ------- --------
Net cash provided by operating activities............ 9,108 2,235 9,770 18,190
--------- ---------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.......................... $ (14,490) $ (1,203) $(5,344) $(10,714)
Proceeds from sale of property and equipment................ 111 -- 112 122
Proceeds from sale of Statia Terminals Southwest, Inc....... -- -- -- 6,500
Buyout of First Salute Leasing, L.P. assets................. (88,511) -- -- --
Acquisition of Statia Operations, net of $185 of cash
acquired.................................................. -- (173,961) -- --
Acquisition of Petroterminal de Panama, S.A................. -- (1,000) -- --
Transaction costs........................................... -- (9,572) -- --
Accrued transaction costs and purchase price adjustments.... -- 7,703 (7,703) --
--------- ---------- ------- --------
Net cash used in investing activities................ (102,890) (178,033) (12,935) (4,092)
--------- ---------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in advances from Parent............................ 203,767 -- -- --
Retirement of preferred stock............................... (18,577) -- -- (6,150)
Bank borrowings............................................. 66,000 -- -- --
Bank repayments............................................. (132,400) -- -- --
Dividends paid to affiliates................................ (25,792) -- -- --
Issuance of 11 3/4% First Mortgage Notes.................... -- 135,000 -- --
Debt costs paid............................................. -- (6,428) -- --
Issuance of preferred stock................................. -- 56,500 -- --
Issuance of common stock.................................... -- 4 -- --
--------- ---------- ------- --------
Net cash provided by (used in) financing
activities......................................... 92,998 185,076 -- (6,150)
--------- ---------- ------- --------
Increase (decrease) in cash and cash equivalents..... (784) 9,278 (3,165) 7,948
CASH AND CASH EQUIVALENTS, at beginning....................... 1,469 -- 9,278 6,113
--------- ---------- ------- --------
CASH AND CASH EQUIVALENTS, at end............................. $ 685 $ 9,278 $ 6,113 $ 14,061
--------- ---------- ------- --------
--------- ---------- ------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for taxes......................................... $ 823 $ 9 $ 513 $ 369
--------- ---------- ------- --------
--------- ---------- ------- --------
Cash paid for interest...................................... $ 4,455 $ -- $15,334 $ 15,940
--------- ---------- ------- --------
--------- ---------- ------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
1. ORGANIZATION AND OPERATIONS
Statia Terminals Group N.V. was formed on September 4, 1996 by Castle
Harlan Partners II, L.P. ("Castle Harlan"), a private equity investment fund
managed by Castle Harlan, Inc., a private merchant bank, certain members of
management and others and commenced operations on November 27, 1996
("Inception"). Statia Terminals Group N.V. and Subsidiaries (the "Company") own
and operate petroleum blending, transshipment and storage facilities located on
the island of St. Eustatius, Netherlands Antilles and at Point Tupper, Nova
Scotia, Canada. The Company's terminaling services are furnished to many of the
world's largest producers of crude oil, integrated oil companies, oil traders,
refiners, petrochemical companies and ship owners. In addition to storage, the
Company provides a variety of related terminal services including bunkering,
crude oil and petroleum product blending and processing, and emergency and spill
response. A subsidiary of the Company provides administrative services for the
Company from its office in Deerfield Beach, Florida.
The Company includes the following primary entities (collectively, the
"Statia Operations"): Statia Terminals Group N.V., Statia Terminals
International N.V. ("Statia"), Statia Terminals N.V. (each incorporated in the
Netherlands Antilles), Statia Terminals Canada, Inc. (incorporated in Nova
Scotia, Canada) and Statia Terminals Southwest, Inc. (incorporated in Texas--the
"Brownsville Facility") which was sold in July 1998 (see Note 15). Significant
intercompany balances and transactions have been eliminated.
The Company was formed during 1996 to acquire the capital stock of Statia
Terminals, Inc. and its subsidiaries and affiliates (the "Predecessor Company")
from Praxair, Inc. ("Praxair"). The combined statements of income (loss) and
cash flows from January 1, 1996 through November 27, 1996 ("the period ended
November 27, 1996"), included the accounts of the Predecessor Company. The
Predecessor Company includes primarily the combination of the following commonly
owned companies: Statia Terminals, Inc. (incorporated in Delaware); Statia
Terminals N.V.; Statia Terminals Point Tupper, Inc. (incorporated in Nova
Scotia, Canada); and Statia Terminals Southwest, Inc. Significant intercompany
balances and transactions have been eliminated.
Prior to January 12, 1996, the Predecessor Company was a wholly owned
subsidiary of CBI Industries, Inc. ("CBI"). On January 12, 1996, pursuant to the
Merger Agreement dated December 22, 1995 (the "Merger"), CBI became a wholly
owned subsidiary of Praxair. This Merger transaction was reflected in the
Predecessor Company's combined financial statements as a purchase effective
January 1, 1996 (see Note 3).
On November 27, 1996, Castle Harlan, members of our management and others
acquired from Praxair all of the outstanding capital stock of Statia Terminals
N.V., Statia Terminals, Inc., their subsidiaries and certain of their affiliates
(the "Castle Harlan Acquisition"). The adjusted purchase price of the Castle
Harlan Acquisition totaled approximately $218,146. The Castle Harlan Acquisition
was paid, in part, by funds received by the Company from the issuance of
$135,000 of 11 3/4% First Mortgage Notes (the "Notes") described in Note 6 and
from the sale of the Company's preferred and common stock. The Castle Harlan
Acquisition has been accounted for under the purchase method of accounting. The
purchase price has been allocated to the assets and liabilities of the Company
based on their fair values as of the date of the Castle Harlan Acquisition. The
investment in Petroterminal de Panama, S.A. is carried at cost and is included
in other noncurrent assets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
These consolidated financial statements have been prepared in conformity
with generally accepted accounting principles as promulgated in the United
States which require management to make estimates and assumptions that affect
the reported amounts of assets and liabilities. Management is also required to
make judgments regarding disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
F-7
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Revenue Recognition
Revenues from terminaling operations are recognized ratably as the services
are provided. Revenues and commissions from bunkering services,
terminaling-related services and bulk product sales are recognized at the time
of delivery of the service or product.
Foreign Currency Translation and Exchange
The consolidated financial statements include the financial statements of
foreign subsidiaries and affiliates translated in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 52 "Foreign Currency Translation."
The assets and liabilities are translated into U.S. dollars at year end exchange
rates. Income and expense items are converted into U.S. dollars at average rates
of exchange prevailing during the year. Substantially all of the Company's
transactions are denominated in U.S. dollars.
Stock-Based Compensation Plans
SFAS No. 123, "Accounting for Stock-Based Compensation," allows for either
the adoption of a fair value method for accounting for stock-based compensation
plans or for the continuation of accounting under Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations with supplemental disclosures.
The Company has chosen to account for its stock options using the intrinsic
value based method prescribed in APB Opinion No. 25 and, accordingly, does not
recognize compensation expense for stock option grants made at an exercise price
equal to or in excess of the fair market value of the stock at the date of grant
to employees. SFAS No. 123 does not impact the Company's results of operations,
financial position or cash flows.
Cash and Cash Equivalents
The Company's and the Predecessor Company's excess cash is invested in
short-term, highly liquid investments with maturities of three months or less.
Such short-term investments are carried at cost, which approximates market, and
are classified as cash and cash equivalents.
Financial Instruments
The Company uses various methods and assumptions to estimate the fair value
of each class of financial instrument. Due to their nature, the carrying value
of cash and cash equivalents, accounts receivable and accounts payable
approximates fair value. The Company's other financial instruments are not
significant.
Inventory
Inventory of oil products is valued at the lower of weighted average cost
or estimated market value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation expense is computed using the straight-line method over the
estimated useful lives of the respective assets. Additions to property and
equipment, replacements, betterments and major renewals are capitalized. Repair
and maintenance expenditures which do not materially increase asset values or
extend useful lives are expensed.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of
F-8
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
any asset may not be recoverable. SFAS No. 121 also requires that long-lived
assets and certain identifiable long-lived assets to be disposed of be reported
at the lower of carrying amount or fair value less cost to sell. The Company
continually evaluates factors, events and circumstances which include, but are
not limited to, its historical and projected operating performance, specific
industry trends and general economic conditions to assess whether the remaining
estimated useful lives of long-lived assets may warrant revision or that the
remaining balance of long-lived assets may not be recoverable. When such
factors, events or circumstances indicate that long-lived assets should be
evaluated for possible impairment, the Company uses an estimate of undiscounted
cash flow over the remaining lives of the long-lived assets in measuring their
recoverability.
Other Noncurrent Assets
Other noncurrent assets primarily consist of deferred financing costs and
an investment in PTP carried at cost in the amounts of $5,432 and $1,000
respectively, as of December 31, 1997, and $4,521 and $1,000, respectively, as
of December 31, 1998. The deferred financing costs related to establishing debt
obligations are amortized ratably over the life of the underlying obligation.
Debt cost amortization expense was $911 for the years ended December 31, 1997
and 1998.
Income Taxes
The Company and the Predecessor Company determine their tax provision and
deferred tax balances in compliance with SFAS No. 109, "Accounting for Income
Taxes." Under this approach, the provision for income taxes represents income
taxes paid or payable for the current year adjusted for the change in deferred
taxes during the year. Deferred income tax assets and liabilities reflect the
net tax effects of temporary differences between the financial statement bases
and the tax bases of assets and liabilities and are adjusted for changes in tax
rates and tax laws when changes are enacted.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components in the
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The following types of items are
to be considered in computing comprehensive income: foreign currency translation
adjustments, pension liability adjustments, and unrealized gain/loss on
securities available for sale. For all periods presented herein, there were no
differences between net income and comprehensive income.
Segment Information
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about product and services, geographic areas, and major customers.
The adoption of SFAS No. 131 had no impact on consolidated results of
operations, financial position or cash flow.
F-9
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Reclassifications
Certain reclassifications were made to the 1996 and 1997 financial
statements in order to conform to the 1998 presentation.
A statement of stockholders' equity for the Predecessor Company is not
presented because the information would not be comparable to that of the
Company.
3. PRAXAIR PURCHASE ACCOUNTING
As discussed in Note 1, prior to January 12, 1996, the Predecessor Company
was a wholly owned subsidiary of CBI. On January 12, 1996, pursuant to the
Merger Agreement dated December 22, 1995, CBI became a wholly owned subsidiary
of Praxair. This Merger transaction was reflected in the Predecessor Company's
combined financial statements as a purchase effective January 1, 1996. The fair
value assigned to the Predecessor Company as of the Merger date was $210,000,
excluding bank borrowings, Praxair and CBI intercompany and advance accounts and
the buyout of certain off-balance-sheet financing ("Merger Value").
The allocation of the Merger Value to the assets and liabilities acquired,
based on the estimated fair value assigned, was as follows:
<TABLE>
<S> <C>
Merger Value.................................................. $210,000
Less--
Debt acquired............................................... 66,000
Intercompany/advance accounts............................... 44,000
Off-balance sheet obligations............................... 89,000
--------
$ 11,000
--------
--------
Allocation of merger value--
Total current assets........................................ $ 17,000
Property and equipment...................................... 111,000
Other noncurrent assets..................................... 4,000
Liabilities assumed......................................... (121,000)
--------
$ 11,000
--------
--------
</TABLE>
In addition, $10,000 of Praxair debt was pushed down to the Predecessor
Company's books effective January 1, 1996. This debt was eliminated in
connection with the Castle Harlan Acquisition.
4. ACQUISITION
As discussed in Note 1, on November 27, 1996, the Company acquired from
Praxair all of the outstanding capital stock of Statia Terminals N.V., Statia
Terminals, Inc., their subsidiaries and certain affiliates. The Castle Harlan
Acquisition has been accounted for under the purchase method of accounting.
Accordingly, the purchase price was allocated to the assets and liabilities of
the Company based on their respective fair values as of the date of the Castle
Harlan Acquisition. The assets of the Company as of the date of the Castle
Harlan Acquisition included certain property and equipment acquired from a
third-party financier by Praxair. (See Note 9.) No portion of the purchase price
of the Company was allocated to intangible assets since the fair value of the
tangible assets exceeded the purchase price. No adjustments were made to the
allocated fair values during 1997 or 1998.
F-10
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
4. ACQUISITION--(CONTINUED)
The allocation of the total purchase price to the assets and liabilities
acquired was as follows:
<TABLE>
<S> <C>
Purchase Price--
Cash paid................................................... $175,146
Stock issued................................................ 43,000
Commissions, fees and expenses.............................. 16,000
--------
Total purchase price..................................... $234,146
--------
--------
Allocation of Purchase Price--
Current assets.............................................. $ 19,570
Property and equipment...................................... 222,907
Other non-current assets.................................... 7,524
Liabilities assumed......................................... (15,855)
--------
Total purchase price..................................... $234,146
--------
--------
</TABLE>
F-11
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31:
<TABLE>
<CAPTION>
USEFUL LIVES
1997 1998 IN YEARS
-------- -------- ------------
<S> <C> <C> <C>
Land........................................................................ $ 1,291 $ 1,291
Land improvements........................................................... 7,964 7,679 5-20
Buildings and improvements.................................................. 2,178 3,303 20-40
Plant machinery............................................................. 216,322 215,017 4-40
Field and office equipment.................................................. 1,677 2,497 3-15
-------- --------
Total property and equipment, at cost.................................. 229,432 229,787
Less--Accumulated depreciation.............................................. 10,903 19,817
-------- --------
Property and equipment, net............................................ $218,529 $209,970
-------- --------
-------- --------
</TABLE>
Pursuant to the Castle Harlan Acquisition, the Company agreed with
stockholders to sell the Brownsville Facility and the M/V Statia Responder. The
M/V Statia Responder is still in operation, and the revenues and costs,
including depreciation, associated with operating this asset are included in the
accompanying financial statements. If the Company sells this asset in the
future, the net proceeds from this sale may be required to be used to redeem
certain of the Company's preferred stock. On July 29, 1998, the Company sold the
Brownsville Facility.
F-12
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
6. DEBT
The 11 3/4% Notes due November 15, 2003 were issued by subsidiaries of the
Company (the "Issuers") on November 27, 1996 in connection with the Castle
Harlan Acquisition and pay interest on May 15 and November 15 of each year. The
Notes are redeemable, in whole or, in part, at the option of the Issuers at any
time on or after November 15, 2000, at the following redemption prices
(expressed as percentages of principal amount), together with accrued and unpaid
interest, if any, thereon to the redemption date, if redeemed during the
12-month period beginning November 15, in the year indicated:
<TABLE>
<CAPTION>
OPTIONAL
YEAR REDEMPTION PRICE
- --------------------------------------------------- ----------------
<S> <C>
2000 105.875%
2001 102.938%
2002 100.000%
</TABLE>
Notwithstanding the foregoing, any time on or prior to November 15, 1999,
the Issuers may redeem up to 35% of the aggregate principal amount of the Notes
with the proceeds of one or more Equity Offerings (as defined in the Indenture
to the Notes) at a redemption price equal to 111.75% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of redemption,
provided that after giving effect to such redemption, at least 65% of the
aggregate principal amount of the Notes remains outstanding.
The Notes are guaranteed on a full, unconditional, joint and several basis
by each of the indirect and direct active subsidiaries of Statia. The Notes are
also subject to certain financial covenants as set forth in the Indenture, the
most restrictive of which include, but are not limited to the following: (i) a
consolidated fixed charge coverage ratio for the prior four full fiscal quarters
of at least 2.0:1, which, if met, will permit the Company to make additional
borrowings above the Company's revolving credit facility discussed below,
(ii) other limitations on indebtedness and (iii) restrictions on certain
payments. In addition, the Notes place restrictions on the Company's ability to
pay dividends other than distributions from the proceeds of assets held for sale
as discussed above and certain management fees as discussed in Note 12 below.
Except with the occurrence of an event of default, subsidiaries of Statia have
no restrictions upon transfers of funds in the form of dividends, loans or cash
advances. The Issuers are in compliance with the financial covenants set forth
in the Indenture.
The Company has a revolving credit facility (the "Credit Facility") which
allows certain of the Company's subsidiaries to borrow up to $17,500 or the
limit of the borrowing base as defined in the Credit Facility. The Credit
Facility calls for a commitment fee of 0.375% per annum on a portion of the
unused funds. The Credit Facility bears interest at a rate of prime plus 0.5%
(8.25% at December 31, 1998). The Credit Facility constitutes senior
indebtedness of the Company and is secured by a first priority lien on certain
of the Company's accounts receivable and inventory. The Credit Facility is
subject to certain restrictive covenants; however, it is not subject to
financial covenants. The Credit Facility does not restrict the Company's
subsidiaries from transferring funds to the Company in the form of dividends,
loans or cash advances; however, the failure to pay interest when due
constitutes an event of default under the Credit Facility and such event of
default, until cured, prohibits upstream dividend payments to be made to the
Company. The Credit Facility expires on November 27, 1999. At December 31, 1997
and 1998, the Company had approximately $8,058 and $7,982, respectively,
available for borrowing under the Credit Facility as limited by the borrowing
base computation and had no outstanding balance.
7. PREFERRED STOCK
The Company has authorized preferred stock of $26,950 divided into 269,500
shares with a par value of $0.10 consisting of the following shares: (i) 20,000
shares of 8% Series A Cumulative Preferred Stock (the "Series A Preferred
Stock"); (ii) 10,000 shares of 8% Series B Cumulative Preferred Stock (the
"Series B Preferred Stock"); (iii) 10,000 shares of 8% Series C Cumulative
Preferred Stock (the "Series C Preferred
F-13
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
7. PREFERRED STOCK--(CONTINUED)
Stock"); (iv) 20,000 shares of 2% Series D Preferred Stock (the "Series D
Preferred Stock"); and (v) 209,500 shares of 2% Series E Preferred Stock (the
"Series E Preferred Stock"). Under certain circumstances as defined in the
Articles of Incorporation and Preferred Stock Agreements (defined below), the
dividend rates on the Series A, Series B and Series C Preferred Stock may
increase from 8% to 14.75%.
The terms of the Series A, Series B and Series C Preferred Stock contain
provisions for redemption beyond the control of the Company and certain
restrictions on the purchase, redemption, defeasance or retirement of the Notes
unless such action is effected (i) at the stated maturity of the Notes, (ii) in
connection with an event of default, (iii) pursuant to the mandatory purchase
offer provisions of the Indenture governing the Notes relating to asset sales or
(iv) pursuant to the redemption provisions of the Indenture relating to
withholding taxes. Other than as permitted by the foregoing provisions, the
Company may not, directly or indirectly, cause or permit Statia or any of its
subsidiaries to, directly or indirectly, purchase, redeem, defease or retire any
Notes if: (i) in the case of the Series A Preferred Stock, (a) the Company shall
not have declared full cash dividends on such series or, if the Indenture
restricts such declaration, full cash dividends on such series to the extent
permitted by the Indenture, or (b) the Company fails to redeem such series when
such redemption is mandatory, (ii) in the case of the Series B Preferred Stock,
the Company fails to redeem such series when such redemption is mandatory,
(iii) in the case of the Series C Preferred Stock, the Company fails to redeem
such series when such redemption is mandatory, (iv) following the occurrence of
certain events set forth in the Preferred Stock Agreements in which the dividend
rate on the Series A, Series B or Series C Preferred Stock is not 8% per annum,
or (v) such purchase, redemption, defeasance or retirement would reduce the
Consolidated Fixed Charge Coverage Ratio (as defined in the Indenture) that, in
certain circumstances, the Series C Preferred Stock may not be redeemed. The
Series A, B and C Preferred Stock in the aggregate of $40,000 was contributed
from Praxair as non-cash equity.
The Series A and Series C Preferred Stock is non-voting stock with a
liquidation preference of one thousand dollars per share. The Company must
redeem these series on the earliest of (i) one year following the maturity date
of the Notes, (ii) one year from the date on which not more than $10,000
aggregate principal amount of the Notes is outstanding (other than those Notes
held or beneficially owned by the Company or any of its affiliates), (iii) the
date on which a holder or beneficial owner of any equity interest in the Company
(other than Praxair) or any option, warrant, convertible security or synthetic
or derivative product related to such equity interest sells, assigns, pledges or
otherwise transfers any such equity interest, except in limited circumstances,
or (iv) 30 days following receipt of notice from the holders of any such series
that the Company has failed to cure a material breach under the Company's Senior
Preferred Stock Agreement or Shareholder Agreement (together the "Preferred
Stock Agreements").
The Series B Preferred Stock is non-voting stock with a liquidation
preference of one thousand dollars per share. The Company must redeem this
series on the earliest of (i) the second anniversary of the initial issuance of
this series of stock, (ii) one year from the date on which not more than $10,000
aggregate principal amount of the Notes is outstanding, (iii) the date on which
a holder or beneficial owner of any equity interest in the Company (other than
Praxair) or any option, warrant, convertible security or synthetic or derivative
product related to such equity interest sells, assigns, pledges or otherwise
transfers any such equity interest, except in limited circumstances, or
(iv) 30 days following receipt of notice from the Series B Preferred
Stockholders that the Company has failed to cure a material breach under the
Preferred Stock Agreements. To the extent that the Company or one of its
affiliates shall have received proceeds from the sale of the M/V Statia
Responder, an emergency and oil spill response vessel owned by a subsidiary, the
Company must redeem the Series B Preferred Stock at the applicable redemption
price therefor out of such proceeds. The Indenture permits the sale of the M/V
Statia Responder and, in the event of such sale, will permit a payment from
Statia to the Company equal to the amount of the liquidation preference plus
accrued and unpaid dividends on the then outstanding Series B Preferred Stock.
F-14
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
7. PREFERRED STOCK--(CONTINUED)
If the Company has not redeemed the Series B Preferred Stock by
November 27, 1998, the Company may, following the exercise of any option to
exchange the Series B Preferred Stock into common equity of the Company (which
option must be exercised by the holders of the Series B Preferred Stock prior to
the third anniversary of the closing date, November 27, 1996), either redeem the
shares for cash or exchange them for common equity of the Company. If the shares
are not redeemed for cash or exchanged for common equity of the Company then the
dividend rate on the Company's Series A, Series B and Series C Preferred Stock
increases from 8% to 14.75% effective November 28, 1998. As the Series B
Preferred Stock was not redeemed by the Company prior to November 27, 1998, the
dividend rate on the Company's Series A, Series B and Series C Preferred Stock
increased from 8% to 14.75% effective November 28, 1998, in accordance with the
Company's Preferred Stock Agreements and its Articles of Incorporation.
If Statia or one of its subsidiaries is permitted, under the terms of the
Consolidated Fixed Charge Coverage Ratio test in the Limitation on Additional
Indebtedness covenant in the Indenture, to issue indebtedness in an amount up to
or greater than the liquidation preference of the Series C Preferred Stock plus
accrued but unpaid dividends thereon, and the Company does not redeem the Series
C Preferred Stock at the applicable redemption price under certain conditions,
then the management fees payable to Castle Harlan, Inc. (see Note 12) thereafter
accrue and will not be paid in cash until such redemption occurs. The Indenture
permits one or more restricted payments from Statia to the Company when such
Consolidated Fixed Charge Coverage Ratio tests permits the incurrence of
indebtedness in an amount up to the liquidation preference plus accrued and
unpaid dividends on the then outstanding Series C Preferred Stock.
The Series D Preferred Stock is non-voting stock, has a liquidation
preference of one thousand dollars per share for which the dividends have been
waived. The Indenture permits the sale of the Brownsville facility and permits a
restricted payment from Statia to the Company equal to the net proceeds from
such sale. Such amounts are required to be applied to redeem the Series D
Preferred Stock. On July 29, 1998 the Company sold the Brownsville Facility and
a restricted payment of $6,150 was made from Statia to the Company to redeem a
portion of the Series D Preferred Stock.
The Series E Preferred Stock is voting stock which has a liquidation
preference of one thousand dollars per share for which the dividends have been
waived.
For the period ended December 31, 1996, the Company accrued dividends of
$152, $77 and $77 for Series A, Series B, and Series C Preferred Stock,
respectively. For the year ended December 31, 1997, the Company accrued
dividends of $1,598, $799 and $799 for Series A, Series B and Series C Preferred
Stock, respectively. For the year ended December 31, 1998, the Company accrued
dividends of $1,970, $984 and $984 for the Series A, Series B and Series C
Preferred Stock, respectively.
8. NOTES RECEIVABLE FROM STOCKHOLDERS
Notes receivable from stockholders represent nonrecourse loans made by the
Company to certain members of management and are secured by pledges of the
Company's common stock. The loans bear interest at 6.49% and are due on the
earlier of (i) November 26, 2003, or (ii) sale of the Company's common stock.
These loans have been classified as a reduction to preferred stock in the
accompanying financial statements.
9. LEASES
The Company and the Predecessor Company rent certain facilities, land and
marine equipment under cancelable and noncancelable operating leases. Rental
expense on operating leases was $13,854 (of which $9,870 including $4,270 for
recognition of lease residual value guarantee, relates to the lease described
below), $491, $3,763 and $3,409 for the period ended November 27, 1996, the
period ended December 31, 1996, the year ended
F-15
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
9. LEASES--(CONTINUED)
December 31, 1997 and the year ended December 31, 1998, respectively. Future
rental commitments during the years ending 1999 through 2003 are $3,619, $2,569,
$2,504, $2,518 and $837, respectively.
On November 17, 1993, Statia Terminals N.V. and a subsidiary entered into
an agreement with a third-party financier (First Salute Leasing, L.P.) pursuant
to which a portion of its land on St. Eustatius was leased to this third party
for the purpose of construction and operation of five million barrels of crude
oil storage tanks and a single point mooring system. Statia Terminals N.V. acted
as agent for the third party with regard to the construction of the facilities.
Statia Terminals N.V. leased the facility from the third party for a minimum
period of five years beginning February 1, 1995. The aggregate construction cost
incurred for these leased assets totaled $88,513. At the completion of the
initial five year term, Statia Terminals N.V. had the option to extend the
lease, purchase the facility from the lessor, or arrange for the leased
properties to be sold to a third party. In the event of purchase or sale of
these properties, Statia Terminals N.V. was obligated to the lessor for any
shortfall between the purchase or sales price and the lease residual value
guarantee. In connection with the Castle Harlan Acquisition, Praxair terminated
the above First Salute Leasing, L.P. off-balance-sheet financing arrangement and
paid in full all obligations related to this lease.
F-16
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
10. INCOME TAXES
The sources of income (loss) by jurisdiction before the provision for
income taxes and preferred stock dividends are:
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
COMPANY -----------------------------------------------
---------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION YEARS ENDED
THROUGH THROUGH DECEMBER 31,
NOVEMBER 27, DECEMBER 31, ----------------------------
1996 1996 1997 1998
---------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C>
U.S................................................. $ 134 $ (300) $ (1,823) $ (362)
Non-U.S............................................. (1,395) 216 (2,562) 3,117
-------- ------ -------- ------
$ (1,261) $ (84) $ (4,385) $2,755
-------- ------ -------- ------
-------- ------ -------- ------
</TABLE>
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
COMPANY ----------------------------------------------
---------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION YEARS ENDED
THROUGH THROUGH DECEMBER 31,
NOVEMBER 27, DECEMBER 31, ----------------------------
1996 1996 1997 1998
---------------- --------------- ------------ ------------
Current:
<S> <C> <C> <C> <C>
U.S.................................................. $ 215 $ -- $ (128) $ --
State................................................ (25) -- (42) --
Non-U.S.............................................. (487) (132) (610) (320)
------ ----- ------ ------
(297) (132) (780) (320)
------ ----- ------ ------
Deferred:
U.S.................................................. (332) -- -- --
------ ----- ------ ------
Total provision................................... $ (629) $(132) $ (780) $ (320)
------ ----- ------ ------
------ ----- ------ ------
</TABLE>
The components of the deferred income provision relate primarily to book
versus tax differences in computing depreciation expense.
A reconciliation of income taxes at the U.S. statutory rate of 35% to the
Company's provision for income taxes follows:
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
COMPANY ----------------------------------------------
---------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION YEARS ENDED
THROUGH THROUGH DECEMBER 31,
NOVEMBER 27, DECEMBER 31, ----------------------------
1996 1996 1997 1998
---------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Income (loss) before income taxes and preferred
stock dividends................................... $ (1,261) $ (84) $ (4,385) $ 2,755
-------- ----- -------- --------
Tax (provision) benefit at U.S. statutory rate...... 440 29 1,535 (964)
State income taxes.................................. -- -- (14) --
Non-U.S. tax rate differential and losses without
tax benefit....................................... (1,069) (119) (2,301) 644
-------- ----- -------- --------
Other, net.......................................... -- (42) -- --
-------- ----- -------- --------
$ (629) $(132) $ (780) $ (320)
-------- ----- -------- --------
-------- ----- -------- --------
</TABLE>
F-17
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
10. INCOME TAXES--(CONTINUED)
For 1996, the Company's effective tax rate exceeds the foreign tax
statutory rates as a result of Canadian large corporation tax and losses
incurred by certain subsidiaries for which the Company has not recognized any
benefit.
The principal temporary differences included on the balance sheets net of
effective tax rates are:
<TABLE>
<CAPTION>
THE COMPANY
----------------------------
DECEMBER 31, DECEMBER 31,
1997 1998
------------ ------------
<S> <C> <C>
Net operating loss and ITC carryforwards................................... $ 29,682 $ 28,080
Valuation allowance........................................................ (29,682) (28,080)
-------- --------
$ -- $ --
-------- --------
-------- --------
</TABLE>
The Company's net deferred tax assets primarily relate to Canadian
investment tax credits and net operating loss carryforwards. The Company has
provided a full valuation allowance against these tax assets, because it is not
certain that the deferred tax assets will be utilized in the future.
The Company's Canadian subsidiaries are subject to a federal large
corporation tax based on 0.225% of the subsidiaries' total equity. As of
April 1, 1997, Nova Scotia enacted a provincial capital tax based on 0.25% of
the subsidiaries' total equity (prorated to 0.1888% for the 1997 calendar year).
The Company has benefited from investment tax credit carryforwards and net
operating tax losses which expire in various amounts through 2003 and 2005,
respectively. The net operating tax loss carryforwards available to offset
Canadian taxable income at December 31, 1997 and 1998 were $58,659 and $55,097,
respectively. The investment tax credit carryforward available to reduce
Canadian income taxes was $7,302 at December 31, 1997 and 1998.
On June 1, 1989, the governments of the Netherlands Antilles and St.
Eustatius approved a Free Zone and Profit Tax Agreement retroactive to
January 1, 1989 and concluding on December 31, 2000. This agreement requires a
subsidiary of the Company to pay a 2% rate on taxable income, as defined, or a
minimum payment of 500 Netherlands Antilles guilders ($282). This agreement
further provides that any amounts paid in order to meet the minimum annual
payment will be available to offset future tax liabilities under the agreement
to the extent that the minimum annual payment is greater than 2% of taxable
income. At December 31, 1998, the amount available to offset future tax
liability under the agreement was approximately $1,412. Currently, the
subsidiary is renegotiating a new agreement with the governments of the
Netherlands Antilles and St. Eustatius that we expect will be effective from
January 1, 1998, through December 31, 2010, with extension provisions to 2015.
Certain of the Company's Netherlands Antilles subsidiaries are not part of
the Free Zone and Profit Tax Agreement and, accordingly, pay Netherlands
Antilles federal income tax at an effective tax rate of up to 45%. Approximately
$67 and $28 of profit tax is included in the Netherlands Antilles tax provision
for the periods ended December 31, 1997 and December 31, 1998, respectively.
11. STOCK OPTIONS
During 1997, the stockholders of the Company approved the 1997 Stock Option
Plan (the "Plan") which allows up to 7,235 shares of $0.10 par value common
stock of the Company to be delivered pursuant to incentive stock option award
agreements or nonqualified stock option award agreements. The incentive stock
option award agreement specifies that after two years of employment from the
date of grant and after each of the following three years, 25% of the option
shares become exercisable unless a Liquidation Event occurs (as defined in the
award agreement) at which time the option becomes fully exercisable. The options
terminate upon termination of employment, except in the event of death,
permanent disability or Company termination other than for substantial cause.
Each option expires ten years after the date of grant.
F-18
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
11. STOCK OPTIONS--(CONTINUED)
During November 1997, 2,895 shares of common stock were granted to certain
employees of the Company pursuant to incentive stock option award agreements at
an exercise price of $0.10, which equaled the fair market value of the Company's
common stock. The Company applies APB Opinion No. 25 and related interpretations
in accounting for options granted to employees and directors. Accordingly, no
compensation costs have been recognized related to the stock options granted in
1997.
During December 1998, 2,895 shares of common stock were granted to certain
employees of the Company pursuant to incentive stock option award agreements at
an exercise price of $0.10. The Company recorded the required compensation
expense under APB 25 on the date of grant representing the difference between
the estimated fair value of the options and the exercise price of $0.10 per
share amortized over the vesting period of five years. The fair value of such
options was determined based on an independent appraisal of the Company's common
stock on the date of grant of $810 per share. The total amount of compensation
expense recognized during 1998 related to such options was $39 and is included
in cost of services and products sold and administrative expenses.
The Company also granted 400 options to purchase common stock to
non-employee directors of the Company. These options vested immediately on the
date of grant. The Company recorded $324 of compensation expense under
APB No. 25 on the date of grant. This amount represented the difference between
the fair value of $810 per share and the exercise price of $0.10 per share. The
compensation expense is included in administrative expenses.
Had compensation cost been recorded for the Company's awards based on fair
value at the grant dates consistent with the methodologies of SFAS No. 123, the
Company's 1998 reported net income (loss) available to common stockholders would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<S> <C>
Net income (loss) available to common stockholders:
As reported................................................................................. $(1,503)
Pro forma................................................................................... $(1,960)
</TABLE>
Under SFAS 123, the value of each option granted is estimated on the date
of grant using the Black Scholes model with the following assumptions: Risk-free
interest rate--6.3%, dividend yield--0%, and expected life of the option--10
years.
12. RELATED PARTY TRANSACTIONS
Prior to November 27, 1996, the Company engaged in various related-party
transactions with Praxair, CBI and their affiliates. Advances consisted
principally of funds loaned by Praxair/CBI for disbursements, debt service and
dividends offset by the transfer of the Predecessor Company's excess cash. The
advances were non-interest-bearing and did not have a specified maturity date.
The Predecessor Company regularly contracted with affiliates of CBI for the
construction and expansion of its facilities and for certain repair and
maintenance work. During the period ended November 27, 1996, $4,828 was paid to
Praxair or CBI affiliates for these activities related to its property and
equipment. It is not possible to determine whether the results of operations and
financial position of the Predecessor Company would be significantly different
had the Predecessor Company contracted with independent third parties for its
construction, expansion, repair and maintenance needs.
Praxair and CBI directly allocated certain corporate administrative
services to the Predecessor Company including certain legal services, risk
management, tax advice and return preparation, employee benefit administration,
cash management and other services. During the period ended November 27, 1996,
$138 was paid for these direct and indirect administrative services. All
intercompany balances owed to Praxair, CBI and their affiliates were fully paid
in connection with the Acquisition.
F-19
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
12. RELATED PARTY TRANSACTIONS--(CONTINUED)
The Company entered into a ten-year management agreement with Castle
Harlan, Inc., to pay an annual management fee of $1,350, plus out-of-pocket
expenses, advisory and strategic planning services subject to certain
conditions. In the event the net proceeds from the sale of the M/V Statia
Responder exceed a specified threshold, Castle Harlan, Inc. may be entitled to a
payment of up to $1,000. This agreement terminates upon a change in control.
13. COMMITMENTS AND CONTINGENCIES
Environmental, Health and Safety Matters
In connection with the Castle Harlan Acquisition, studies were undertaken
by and for Praxair to identify potential environmental, health and safety
matters. Certain matters involving potential environmental costs were identified
at the Point Tupper, Nova Scotia, Canada facility. Praxair has agreed to pay for
certain of these environmental costs subject to certain limitations. Praxair has
paid approximately $2,300 during the period from November 27, 1996 to
December 31, 1998 related to such costs. Based on investigations conducted and
information available to date, the potential cost of additional remediation and
compliance is estimated at $10,000, substantially all of which the Company
believes is the responsibility of Praxair per the Castle Harlan Acquisition
agreement. The Company has also identified certain other environmental, health
and safety costs not covered by the agreement with Praxair for which $1,500 was
accrued in 1996 ($10 of which has been expended through December 31, 1998). The
Company believes that these environmental, health and safety costs, subject to
reimbursements from Praxair, will not have a material adverse effect on the
Company's financial position, cash flows or results of operations.
Litigation
Global Petroleum Corp. ("Global") brought an action against the Company in
December 1993 in the Supreme Court of Nova Scotia seeking the release of certain
petroleum products owned by Global that the Company was holding to secure the
payment of certain invoices. Global secured the release of the products by
posting a $2,000 bond. Global claims damages of $1,200 for breach of contract
and the Company counter-claimed for breach of contract and payment of the
approximately $2,000 of unpaid invoices for product storage and other service.
In April 1996, Global, Scotia Synfuels Limited and their related companies
brought suit against CBI and the Company in the Supreme Court of Nova Scotia
alleging damages in the amount of $100,000 resulting from misrepresentation,
fraud and breach of fiduciary duty associated with the reactivation of the Point
Tupper facility and the sale of their shares in Point Tupper Terminals Company,
a predecessor to Statia Canada, to an affiliate of the Company and CBI.
In May 1994, the U.S. Department of Justice brought an action in the U.S.
District Court for the District of the Virgin Islands against Statia Terminals,
Inc. and Statia Terminals, N.V. for $3,600 of pollution clean-up costs in
connection with the discharge of oil into the territorial waters of the U.S.
Virgin Islands and Puerto Rico by a barge that had been loaded by Statia
Terminals, N.V. at St. Eustatius but was not affiliated with the Company. On
April 16, 1998, the U.S. District Court ruled that it lacked jurisdiction over
Statia Terminals, N.V. and dismissed it from the case.
The Company believes the allegations made in these proceedings are
factually inaccurate and intends to vigorously contest these claims. In
connection with the Castle Harlan Acquisition, Praxair agreed to indemnify the
Company against damages relating to the foregoing proceedings. While no
estimates can reasonably be made of any ultimate liability at this time, the
Company believes the ultimate outcome of these proceedings will not have a
material adverse effect on the Company's business, financial condition or
results of operations.
F-20
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
13. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
The Company is involved in various other claims and litigation arising in
the normal course of its business. Based upon analysis of legal matters and
discussions with legal counsel, the Company believes that the ultimate outcome
of these matters will not have a material adverse effect on the Company's
financial position, cash flows and results of operations.
Accrued Expenses
A summary of accrued expenses consists of the following as of December 31:
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Dividends payable................................................................. $ 3,502 $ 7,440
Personnel and related costs....................................................... 2,296 2,835
Professional fees................................................................. 1,079 1,175
Environmental expenses............................................................ 1,500 1,490
Other............................................................................. 2,722 3,006
------- -------
$11,099 $15,946
------- -------
------- -------
</TABLE>
14. SEGMENT INFORMATION
The Company is organized around several different factors the most
significant of which are products and services and geographic location. The
Company's primary products and services are bunker and bulk product sales and
terminaling services (consisting of storage, throughput, dock charges, emergency
response fees and other terminal charges).
The primary measures of profit and loss utilized by the Company's
management to make decisions about resources to be allocated to each division
are earnings before interest, taxes, depreciation, amortization and certain
unallocated profits and losses ("Internal EBITDA") and earnings before interest
taxes and certain unallocated profits and losses ("Internal EBIT").
F-21
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
14. SEGMENT INFORMATION--(CONTINUED)
The following information is provided for the Company's bunker and bulk
products sales and terminaling services segments:
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY THE COMPANY
---------------- ----------------------------------------------
FOR THE FOR THE
PERIOD FROM PERIOD FROM
JANUARY 1, 1996 INCEPTION FOR THE YEARS ENDED
THROUGH THROUGH DECEMBER 31,
NOVEMBER 27, DECEMBER 31, ----------------------------
1996 1996 1997 1998
---------------- --------------- ------------ ------------
REVENUES:
<S> <C> <C> <C> <C>
Terminaling services.................................... $ 44,119 $ 5,693 $ 53,165 $ 66,625
Bunker and bulk product sales........................... 96,879 9,263 89,334 70,137
-------- ------- -------- --------
Total................................................ $140,998 $14,956 $142,499 $136,762
-------- ------- -------- --------
-------- ------- -------- --------
INTERNAL EBITDA:
Terminaling services.................................... $ 15,037 $ 2,351 $ 20,417 $ 30,845
Bunker and bulk product sales........................... 3,277 14 2,699 2,965
-------- ------- -------- --------
Total................................................ $ 18,314 $ 2,365 $ 23,116 $ 33,810
-------- ------- -------- --------
-------- ------- -------- --------
DEPRECIATION AND AMORTIZATION EXPENSE:
Terminaling services.................................... $ 8,832 $ 868 $ 10,093 $ 10,923
Bunker and bulk product sales........................... 541 66 818 498
-------- ------- -------- --------
Total................................................ $ 9,373 $ 934 $ 10,911 $ 11,421
-------- ------- -------- --------
-------- ------- -------- --------
INTERNAL EBIT:
Terminaling services.................................... $ 6,205 $ 1,483 $ 10,324 $ 19,922
Bunker and bulk product sales........................... 2,736 (52) 1,881 2,467
-------- ------- -------- --------
Total................................................ $ 8,941 $ 1,431 $ 12,205 $ 22,389
-------- ------- -------- --------
-------- ------- -------- --------
CAPITAL EXPENDITURES:
Terminaling services.................................... $ 12,868 $ 1,147 $ 4,735 $ 8,274
Bunker and bulk product sales........................... 1,234 -- 58 1,212
Other unallocated....................................... 388 56 551 1,228
-------- ------- -------- --------
Total................................................ $ 14,490 $ 1,203 $ 5,344 $ 10,714
-------- ------- -------- --------
-------- ------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
ASSETS:
Terminaling services.......................................................... $220,591 $208,642
Bunker and bulk product sales................................................. 8,964 12,058
Unallocated assets............................................................ 16,924 24,910
-------- --------
$246,479 $245,610
-------- --------
-------- --------
</TABLE>
F-22
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
14. SEGMENT INFORMATION--(CONTINUED)
A reconciliation of Internal EBIT to the Company's income (loss) before
provision for income taxes and preferred stock dividends is as follows:
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
COMPANY -----------------------------------------------
---------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION FOR THE YEARS ENDED
THROUGH THROUGH DECEMBER 31,
NOVEMBER 27, DECEMBER 31, ----------------------------
1996 1996 1997 1998
---------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C>
Internal EBIT................................... $ 8,941 $ 1,431 $ 12,205 $ 22,389
Unallocated operating and administrative
expenses...................................... (472) (30) (1,182) (2,726)
Interest expense excluding debt cost
amortization expense.......................... (9,787) (1,525) (15,963) (15,940)
Interest income................................. 57 40 555 684
Loss on sale of Statia Terminals Southwest,
Inc........................................... -- -- -- (1,652)
-------- -------- -------- --------
Income (loss) before provision for income taxes
and preferred stock dividends................. $ (1,261) $ (84) $ (4,385) $ 2,755
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The following information is provided with respect to the geographic
operations of the Company:
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
COMPANY -----------------------------------------------
---------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION FOR THE YEARS ENDED
THROUGH THROUGH DECEMBER 31,
NOVEMBER 27, DECEMBER 31, ----------------------------
1996 1996 1997 1998
---------------- ---------------- ------------ ------------
REVENUES:
<S> <C> <C> <C> <C>
Caribbean.................................... $126,557 $ 13,194 $122,042 $114,091
Canada....................................... 11,724 1,631 18,586 21,058
United States................................ 2,717 131 1,871 1,613
-------- -------- -------- --------
Total revenues............................ $140,998 $ 14,956 $142,499 $136,762
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
LONG-TERM ASSETS:
Caribbean..................................................................... $185,702 $183,872
Canada........................................................................ 29,826 29,170
United States................................................................. 8,662 1,672
Panama........................................................................ 1,000 1,000
-------- --------
$225,190 $215,714
-------- --------
-------- --------
</TABLE>
Significant Customers
The Company presently has long term storage and throughput contracts with
Bolanter Corporation N.V. (an affiliate of Saudi Aramco) and a subsidiary of
Tosco Corporation which expire in 2000 and 1999, respectively. The Company also
derives revenues from parties unaffiliated with either Saudi Aramco or Tosco,
because of the movement of Saudi Aramco and Tosco products through the Company's
terminals. Additionally, the Company sells bunker fuels to another affiliate of
Saudi Aramco at its St. Eustatius facility.
F-23
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
14. SEGMENT INFORMATION--(CONTINUED)
The following table sets forth such revenues as a percentage of our total
revenue.
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY THE COMPANY
--------------- -------------------------------------------------
JANUARY 1, 1996 YEARS ENDED DECEMBER 31,
THROUGH PERIOD FROM
NOVEMBER 27, INCEPTION THROUGH ----------------------------
1996 DECEMBER 31, 1996 1997 1998
--------------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
Saudi Aramco-related revenues
- ------------------------------------------------------------
Storage and throughput contract............................. 6.2% 5.9% 7.0% 7.4%
Unaffiliated third parties.................................. 11.7% 7.7% 6.4% 7.7%
Bunker sales................................................ 1.7% 2.2% 2.1% 1.5%
----- ----- ---- ----
Total..................................................... 19.6% 15.8% 15.5% 16.6%
----- ----- ---- ----
----- ----- ---- ----
Tosco-related revenues
- ------------------------------------------------------------
Storage and throughput contract............................. 4.1% 3.2% 6.9% 7.1%
Unaffiliated third parties.................................. 1.3% 4.7% 3.9% 1.9%
Bunker sales................................................ 0.6% 0.8% 0.1% 0.0%
----- ----- ---- ----
Total..................................................... 6.0% 8.7% 10.9% 9.0%
----- ----- ---- ----
----- ----- ---- ----
</TABLE>
Although the Company has long-standing relationships and long-term
contracts with these customers, if such long-term contracts were not renewed or
replaced at the end of their terms, or if the Company otherwise lost any
significant portion of its revenues from these two customers, such
non-renewal/replacement or loss could have a material adverse effect on the
Company's business, financial condition and ability to pay dividends. The
Company also has long-term contracts with other key customers, and there can be
no assurance that these contracts will be renewed at the end of their terms or
that the Company will be able to enter into other long-term contracts on terms
favorable to it, or at all.
No other customer accounted for more than 10% of the Predecessor Company's
or the Company's total revenues in 1996, 1997 or 1998.
15. LOSS ON SALE OF STATIA TERMINALS SOUTHWEST, INC.
On July 29, 1998, the Company sold Statia Terminals Southwest, Inc.
("Southwest") for $6,500 in cash resulting in net proceeds of approximately
$6,150. The Company retained certain of the pre-closing assets and liabilities
of Southwest consisting primarily of accounts receivable and accrued expenses
and agreed to indemnify the purchaser for certain contingent legal and
environmental matters up to a maximum of $500 through July 29, 1999. No
provision has been made in the Company's financial statements for these
contingent matters as management believes it is not probable the Company will
ever be required to provide such indemnification. The net book value of the
assets and liabilities sold on July 29, 1998, was $7,802. The loss on the sale
of Southwest of $1,652 is included in gain (loss) on sale of property and
equipment since substantially all of the value of Southwest was originally
recorded in this account when the Company was acquired.
F-24
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
16. VALUATION AND QUALIFYING ACCOUNTS
The table below summarizes the activity in the accounts receivable
valuation account for the periods indicated.
<TABLE>
<CAPTION>
BALANCE, CHARGES DEDUCTIONS, BALANCE,
BEGINNING TO WRITE-OFFS, END OF
OF PERIOD EXPENSE NET PERIOD
--------- -------- ------------- --------
<S> <C> <C> <C> <C>
Trade Accounts Receivable
For the period ended November 27, 1996......................... $ 645 $ 406 $ (273) $ 778
For the period ended December 31, 1996......................... 778 -- (9) 769
For the year ended December 31, 1997........................... 769 11 50 830
For the year ended December 31, 1998........................... 830 72 (117) 785
Deferred Tax Asset Valuation Allowance
For the period ended November 27, 1996......................... 30,646 1,000 -- 31,646
For the period ended December 31, 1996......................... 31,646 99 (197) 31,548
For the year ended December 31, 1997........................... 31,548 -- (1,866) 29,682
For the year ended December 31, 1998........................... 29,682 371 (1,973) 28,080
</TABLE>
F-25
<PAGE>
An aerial view of our terminal at St.[nb]Eustatius, Netherlands Antilles. Our
jetty, original storage tanks, atmospheric topping unit and other berthing
facilities appear in the foreground, clean storage tanks appear at the mezzanine
level, and crude oil and fuel oil tanks appear at the upper level.
An aerial view of our terminal at Point Tupper, Nova Scotia, Canada. The large
vessel in the foreground is discharging crude oil into the tanks in the upper
left and to the small vessel simultaneously.
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the cost and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
common shares being registered. All amounts are estimates except the SEC
registration fee, the National Association of Securities Dealers filing fees and
the Nasdaq National Market fee.
<TABLE>
<CAPTION>
AMOUNT TO BE PAID
-----------------
<S> <C>
SEC registration fee....................................................... $ 42,256
NASD filing fee............................................................ 15,700
Nasdaq National Market fee................................................. 75,000
Printing and engraving..................................................... 350,000
Legal fees and expenses.................................................... 1,900,000
Tax consulting fees and expenses........................................... 200,000
Accounting fees and expenses............................................... 450,000
Blue sky fees and expenses (including legal fees).......................... 50,000
Transfer agent fees........................................................ 30,000
Netherlands capital tax.................................................... 450,000
Miscellaneous.............................................................. 37,044
-----------
Total.................................................................... $ 3,600,000
-----------
-----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Netherlands Antilles
The Articles of Incorporation of the Issuer contain specific provisions
under which members of the board of directors, officers, and attorneys-in-fact
are indemnified against any liability which such person may incur in the
aforementioned capacity as such.
ITEM 15. RECENT SALES OF UNREGISTERED SHARES.
In November 1996, the Registrant issued (i) $40 million of preferred stock
to Praxair, (ii) $55 million of preferred stock and common stock to Castle
Harlan and its affiliates, (iii) $4.5 million of preferred stock and common
stock to our senior management and (iv) $1.5 million of preferred stock and
common stock to a consultant of the registrant. Each of these securities were
issued pursuant to the exception provided by Section 4(2) of the Securities Act
of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 -- Form of Underwriting Agreement.
3.1* -- Articles of Incorporation of Statia Terminals Group N.V.
3.2 -- Proposed Articles of Incorporation of Statia Terminals Group N.V.
4.1** -- Indenture, dated as of November 27, 1996, among Statia Terminals International N.V., Statia
Terminals Canada, Incorporated, as Issuers, and Statia Terminals Corporation N.V., Statia
Terminals Delaware, Inc., Statia Terminals, Inc., Statia Terminals N.V., Statia Delaware Holdco
II, Inc., Saba Trustcompany N.V., Bicen Development Corporation N.V., Statia Terminals
Southwest, Inc., W.P. Company, Inc., Seven Seas Steamship Company, Inc., Seven Seas Steamship
Company (Sint Eustatius) N.V., Point Tupper Marine Services Limited, Statia Laboratory Services
N.V., Statia Tugs N.V. (collectively, the "Subsidiary Guarantors") and Marine Midland Bank.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
4.1a**** -- First Amendment, dated as of August 14, 1997, to the Indenture, dated as of November 27, 1996,
among Statia Terminals International N.V., a Netherlands Antilles corporation, Statia Terminals
Canada, Incorporated, a corporation organized under the laws of Nova Scotia, Canada, the
Subsidiary Guarantors named therein and Marine Midland Bank.
4.1b***** -- Second Amendment, dated as of February 25, 1998, to the Indenture, dated as of November 27,
1996, among Statia Terminals International N.V., a Netherlands Antilles corporation, Statia
Terminals Canada, Incorporated, a corporation organized under the laws of Nova Scotia, Canada,
the Subsidiary Guarantors named therein and Marine Midland Bank.
4.1c* -- Third Amendment, dated as of July 29, 1998, to the Indenture, dated as of November 27, 1996,
among Statia Terminals International N.V., a Netherlands Antilles corporation, Statia Terminals
Canada, Incorporated, a corporation organized under the laws of Nova Scotia, Canada, the
Subsidiary Guarantors named therein and Marine Midland Bank.
4.2** -- Form of Guarantee of shares issued pursuant to the Indenture (included in Exhibit 4.1 hereto).
4.3** -- Share Pledge Agreement, dated as of November 27, 1996, by and between Statia Terminals
International N.V. and Marine Midland Bank.
4.4* -- Amendment, dated as of December 18, 1998, by and among Statia Terminals Delaware N.V., Marine
Midland Bank and Statia Terminals Delaware Inc. to Share Pledge Agreement, dated as of
November 27, 1996 by and between Statia Terminals International N.V. and Marine Midland Bank.
4.5** -- Share Pledge Agreement, dated as of November 27, 1996, by and between Statia Terminals N.V. and
Marine Midland Bank.
4.6** -- Share Pledge Agreement, dated as of November 27, 1996, by and between Statia Terminals
Corporation N.V. and Marine Midland Bank.
4.7** -- Share Pledge Agreement, dated as of November 27, 1996, by and between Seven Seas Steamship
Company, Inc. and Marine Midland Bank.
4.8** -- Fiduciary Transfer of Tangible Assets Agreement, dated as of November 27, 1996, by and between
Statia Terminals N.V., Saba Trustcompany N.V., Bicen Development Corporation N.V., Statia
Laboratory Services N.V., Statia Tugs N.V., Seven Seas Steamship Company (Sint Eustatius) N.V.
and Marine Midland Bank.
4.9** -- Fiduciary Assignment of Intangible Assets Agreement, dated as of November 27, 1996, by and
between Statia Terminals International N.V., Statia Terminals Corporation N.V., Statia Terminals
N.V., Saba Trustcompany N.V., Bicen Development Corporation N.V., Statia Laboratory Services
N.V., Seven Seas Steamship Company (Sint Eustatius) N.V., Statia Tugs N.V. and Marine Midland
Bank.
4.10** -- Deed of Mortgage, dated as of November 27, 1996, by and among Statia Terminals N.V., Statia
Laboratory Services N.V., Saba Trustcompany N.V. and Bicen Development Corporation N.V. as
mortgagors and Marine Midland Bank as mortgagee.
4.11** -- Fixed and Floating Charge Debenture, made as of November 27, 1996, between Statia Terminals
Canada, Incorporated and Marine Midland Bank.
4.12** -- Debenture Delivery Agreement, dated as of November 27, 1996, between Statia Terminals Canada,
Incorporated and Marine Midland Bank.
4.13** -- Shares Pledge Agreement, made as of November 27, 1996, between Statia Terminals Canada,
Incorporated and Marine Midland Bank.
4.14** -- Shares Pledge Agreement, dated as of November 27, 1996, between Statia Terminals Corporation
N.V. and Marine Midland Bank.
4.15** -- Debt Allocation Agreement, dated as of November 27, 1996, between Statia Terminals International
N.V. and Statia Terminals Canada, Incorporated.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
4.16** -- United States Shares Pledge and Share Agreement, dated as of November 27, 1996, by and among
Statia Terminals International N.V., Statia Delaware Holdco II, Statia Terminals Delaware, Inc.,
Statia Terminals, Inc., W.P. Company, Inc. and Marine Midland Bank.
4.17 -- Form of Registration Rights Agreement between Statia Terminals Group N.V. and Statia Terminals
Holdings N.V.
5.1 -- Opinion of Smeets Thesseling van Bokhorst Spigt, special Netherlands Antilles counsel to the
Issuer, regarding the legality of the common shares.
10.1** -- Storage and Throughput Agreement, dated as of May 6, 1993 ("Storage and Throughput Agreement").
10.2** -- Marine Fuel Agreement, dated as of May 6, 1993 ("Marine Fuel Agreement").
10.3** -- Amendment, dated as of January 1, 1996 to (i) the Storage and Throughput Agreement and (ii) the
Marine Fuel Agreement.
10.3a***** -- Amendment, dated as of December 27, 1996 to (i) the Storage and Throughput Agreement and
(ii) the Marine Fuel Agreement for the year ended December 31, 1997.
10.3b***** -- Amendment, dated as of December 28, 1997 to (i) the Storage and Throughput Agreement and
(ii) the Marine Fuel Agreement for the year ended December 31, 1998.
10.3c* -- Amendment, dated February 26, 1999 to (i) the Storage and Throughput Agreement and (ii) the
Marine Fuel Agreement for the years ended December 31, 2000.
10.3d****** -- Amendment, dated as of March 23, 1999 to the Storage and Throughput Agreement.
10.4** -- Storage and Throughput Agreement, dated as of August 20, 1993.
10.5** -- Storage and Throughput Agreement, dated as of August 1, 1994.
10.6** -- Employment Agreement, dated as of November 27, 1996, between Statia Terminals Group N.V., Statia
Terminals, Inc. and James G. Cameron.
10.7*** -- Employment Agreement, dated as of November 27, 1996, between Statia Terminals Group N.V., Statia
Terminals, Inc. and Thomas M. Thompson, Jr.
10.8*** -- Employment Agreement, dated as of November 27, 1996, between Statia Terminals Group N.V., Statia
Terminals, Inc. and Robert R. Russo.
10.9*** -- Employment Agreement, dated as of November 27, 1996, between Statia Terminals Group N.V., Statia
Terminals, Inc. and John D. Franklin.
10.10** -- Employment Agreement, dated as of November 27, 1996, between Statia Terminals Group N.V., Statia
Terminals, Inc. and James F. Brenner.
10.11** -- Employment Agreement, dated as of November 27, 1996, between Statia Terminals Group N.V., Statia
Terminals, Inc. and Jack R. Pine.
10.12** -- Loan and Share Agreement, dated as of November 27, 1996 between Congress Financial Corporation
(Florida) and Statia Terminals, N.V.
10.13** -- Loan Agreement, dated as of November 27, 1996, by and among Congress Financial Corporation
(Canada), Statia Terminals Canada, Incorporated and Point Tupper Marine Services Limited.
10.14***** -- 1997 Stock Option Plan with Award Agreements.
10.15 -- Form of 1999 Share Option Plan.
10.16 -- Form of Employment Agreement to be entered into as described under "Management--Employment
Agreements."
21.1* -- Subsidiaries of the Registrant.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of White & Case LLP.
23.3 -- Consent of Smeets Thesseling van Bokhorst Spigt (contained in the opinion filed as Exhibit 5.1
hereto).
23.4 -- Consent of PricewaterhouseCoopers.
23.5* -- Consent of The Independent Liquid Terminals Association.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
23.6* -- Consent of The New York Mercantile Exchange.
23.7* -- Consent of Oil Price Information Service.
23.8 -- Consent of Stewart McKelvey Stirling Scales.
27.1***** -- Financial Data Schedules (for electronic filing only).
</TABLE>
- ------------------
* Previously filed.
** Incorporated by reference to the Registration Statement of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated
on Form S-4, dated December 20, 1996, and amendments thereto filed with
the U.S. Securities and Exchange Commission (Registration Statement
No. 333-18455), which became effective on February 14, 1997.
*** Incorporated by reference to the December 31, 1996 Form 10-K of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated,
Dated May 13, 1997.
**** Incorporated by reference to the September 30, 1997 Form 10-Q of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated,
dated November 14, 1997.
***** Incorporated by reference to the December 31, 1997 Form 10-K of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated,
dated March 31, 1998.
****** Incorporated by reference to the December 31, 1998 10-K of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated,
dated March 31, 1999.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation of the Registrant, the Underwriting Agreement, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the shares being registered hereunder, the Registrant will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the shares offered therein,
and the offering of such shares at that time shall be deemed to be the
initial bona fide offering thereof.
(3) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in this Registration Statement shall be
deemed to be a new Registration Statement relating to the securities
offered herein, and the offering of such shares at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Deerfield Beach, State of
Florida, on April 20, 1999.
STATIA TERMINALS GROUP N.V.
By: /s/ JAMES G. CAMERON
-------------------------------
Name: James G. Cameron
Title: Director
By: /s/ JACK R. PINE
-------------------------------
Name: Jack R. Pine
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on April 20, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ -------------------------------------------
<S> <C>
/s/ JAMES G. CAMERON Director
- -----------------------------------------
James G. Cameron
* Director
- -----------------------------------------
John K. Castle
* Director
- -----------------------------------------
Admiral James L. Holloway, III
* Director
- -----------------------------------------
Francis Jungers
* Director
- -----------------------------------------
David B. Pittaway
* Director
- -----------------------------------------
Jonathan R. Spicehandler
* Director
- -----------------------------------------
Ernest Voges
* Director
- -----------------------------------------
Justin B. Wender
* Vice President and Treasurer (Principal
- ----------------------------------------- Executive Officer, Principal Financial
James F. Brenner Officer and Principal Accounting Officer)
* By: /s/ JACK R. PINE
------------------------------
Jack R. Pine
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 -- Form of Underwriting Agreement.
3.1* -- Articles of Incorporation of Statia Terminals Group N.V.
3.2 -- Proposed Articles of Incorporation of Statia Terminals Group N.V.
4.1** -- Indenture, dated as of November 27, 1996, among Statia Terminals International N.V., Statia
Terminals Canada, Incorporated, as Issuers, and Statia Terminals Corporation N.V., Statia
Terminals Delaware, Inc., Statia Terminals, Inc., Statia Terminals N.V., Statia Delaware Holdco
II, Inc., Saba Trustcompany N.V., Bicen Development Corporation N.V., Statia Terminals
Southwest, Inc., W.P. Company, Inc., Seven Seas Steamship Company, Inc., Seven Seas Steamship
Company (Sint Eustatius) N.V., Point Tupper Marine Services Limited, Statia Laboratory Services
N.V., Statia Tugs N.V. (collectively, the "Subsidiary Guarantors") and Marine Midland Bank.
4.1a**** -- First Amendment, dated as of August 14, 1997, to the Indenture, dated as of November 27, 1996,
among Statia Terminals International N.V., a Netherlands Antilles corporation, Statia Terminals
Canada, Incorporated, a corporation organized under the laws of Nova Scotia, Canada, the
Subsidiary Guarantors named therein and Marine Midland Bank.
4.1b***** -- Second Amendment, dated as of February 25, 1998, to the Indenture, dated as of November 27,
1996, among Statia Terminals International N.V., a Netherlands Antilles corporation, Statia
Terminals Canada, Incorporated, a corporation organized under the laws of Nova Scotia, Canada,
the Subsidiary Guarantors named therein and Marine Midland Bank.
4.1c* -- Third Amendment, dated as of July 29, 1998, to the Indenture, dated as of November 27, 1996,
among Statia Terminals International N.V., a Netherlands Antilles corporation, Statia Terminals
Canada, Incorporated, a corporation organized under the laws of Nova Scotia, Canada, the
Subsidiary Guarantors named therein and Marine Midland Bank.
4.2** -- Form of Guarantee of shares issued pursuant to the Indenture (included in Exhibit 4.1 hereto).
4.3** -- Share Pledge Agreement, dated as of November 27, 1996, by and between Statia Terminals
International N.V. and Marine Midland Bank.
4.4* -- Amendment, dated as of December 18, 1998, by and among Statia Terminals Delaware N.V., Marine
Midland Bank and Statia Terminals Delaware Inc. to Share Pledge Agreement, dated as of November
27, 1996, by and between Statia Terminals International N.V. and Marine Midland Bank.
4.5** -- Share Pledge Agreement, dated as of November 27, 1996, by and between Statia Terminals N.V. and
Marine Midland Bank.
4.6** -- Share Pledge Agreement, dated as of November 27, 1996, by and between Statia Terminals
Corporation N.V. and Marine Midland Bank.
4.7** -- Share Pledge Agreement, dated as of November 27, 1996, by and between Seven Seas Steamship
Company, Inc. and Marine Midland Bank.
4.8** -- Fiduciary Transfer of Tangible Assets Agreement, dated as of November 27, 1996, by and between
Statia Terminals N.V., Saba Trustcompany N.V., Bicen Development Corporation N.V., Statia
Laboratory Services N.V., Statia Tugs N.V., Seven Seas Steamship Company (Sint Eustatius) N.V.
and Marine Midland Bank.
4.9** -- Fiduciary Assignment of Intangible Assets Agreement, dated as of November 27, 1996, by and
between Statia Terminals International N.V., Statia Terminals Corporation N.V., Statia Terminals
N.V., Saba Trustcompany N.V., Bicen Development Corporation N.V., Statia Laboratory Services
N.V., Seven Seas Steamship Company (Sint Eustatius) N.V., Statia Tugs N.V. and Marine Midland
Bank.
4.10** -- Deed of Mortgage, dated as of November 27, 1996, by and among Statia Terminals N.V., Statia
Laboratory Services N.V., Saba Trustcompany N.V. and Bicen Development Corporation N.V. as
mortgagors and Marine Midland Bank as mortgagee.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
4.11** -- Fixed and Floating Charge Debenture, made as of November 27, 1996, between Statia Terminals
Canada, Incorporated and Marine Midland Bank.
4.12** -- Debenture Delivery Agreement, dated as of November 27, 1996, between Statia Terminals Canada,
Incorporated and Marine Midland Bank.
4.13** -- Shares Pledge Agreement, made as of November 27, 1996, between Statia Terminals Canada,
Incorporated and Marine Midland Bank.
4.14** -- Shares Pledge Agreement, dated as of November 27, 1996, between Statia Terminals Corporation
N.V. and Marine Midland Bank.
4.15** -- Debt Allocation Agreement, dated as of November 27, 1996, between Statia Terminals International
N.V. and Statia Terminals Canada, Incorporated.
4.16** -- United States Shares Pledge and Share Agreement, dated as of November 27, 1996, by and among
Statia Terminals International N.V., Statia Delaware Holdco II, Statia Terminals Delaware, Inc.,
Statia Terminals, Inc., W.P. Company, Inc. and Marine Midland Bank.
4.17 -- Form of Registration Rights Agreement between Statia Terminals Group N.V. and Statia Terminals
Holdings N.V.
5.1 -- Opinion of Smeets Thesseling van Bokhorst Spigt, special Netherlands Antilles counsel to the
Issuer, regarding the legality of the common shares.
10.1** -- Storage and Throughput Agreement, dated as of May 6, 1993 ("Storage and Throughput Agreement").
10.2** -- Marine Fuel Agreement, dated as of May 6, 1993 ("Marine Fuel Agreement").
10.3** -- Amendment, dated as of January 1, 1996 to (i) the Storage and Throughput Agreement and (ii) the
Marine Fuel Agreement.
10.3a***** -- Amendment, dated as of December 27, 1996 to (i) the Storage and Throughput Agreement and
(ii) the Marine Fuel Agreement for the year ended December 31, 1997.
10.3b***** -- Amendment, dated as of December 28, 1997 to (i) the Storage and Throughput Agreement and
(ii) the Marine Fuel Agreement for the year ended December 31, 1998.
10.3c* -- Amendment, dated February 26, 1999 to (i) the Storage and Throughput Agreement and (ii) the
Marine Fuel Agreement for the year ended December 31, 2000.
10.3d****** -- Amendment, dated as of March 23, 1999 to the Storage and Throughput Agreement.
10.4** -- Storage and Throughput Agreement, dated as of August 20, 1993.
10.5** -- Storage and Throughput Agreement, dated as of August 1, 1994.
10.6** -- Employment Agreement, dated as of November 27, 1996, between Statia Terminals Group N.V., Statia
Terminals, Inc. and James G. Cameron.
10.7*** -- Employment Agreement, dated as of November 27, 1996, between Statia Terminals Group N.V., Statia
Terminals, Inc. and Thomas M. Thompson, Jr.
10.8*** -- Employment Agreement, dated as of November 27, 1996, between Statia Terminals Group N.V., Statia
Terminals, Inc. and Robert R. Russo.
10.9*** -- Employment Agreement, dated as of November 27, 1996, between Statia Terminals Group N.V., Statia
Terminals, Inc. and John D. Franklin.
10.10** -- Employment Agreement, dated as of November 27, 1996, between Statia Terminals Group N.V., Statia
Terminals, Inc. and James F. Brenner.
10.11** -- Employment Agreement, dated as of November 27, 1996, between Statia Terminals Group N.V., Statia
Terminals, Inc. and Jack R. Pine.
10.12** -- Loan and Share Agreement, dated as of November 27, 1996 between Congress Financial Corporation
(Florida) and Statia Terminals, N.V.
10.13** -- Loan Agreement, dated as of November 27, 1996, by and among Congress Financial Corporation
(Canada), Statia Terminals Canada, Incorporated and Point Tupper Marine Services Limited.
10.14***** -- 1997 Stock Option Plan with Award Agreements.
10.15 -- Form of 1999 Share Option Plan.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.16 -- Form of Employment Agreement to be entered into as described under "Management--Employment
Agreements."
21.1* -- Subsidiaries of the Registrant.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of White & Case LLP.
23.3 -- Consent of Smeets Thesseling van Bokhorst Spigt (contained in the opinion filed as Exhibit 5.1
hereto).
23.4 -- Consent of PricewaterhouseCoopers.
23.5* -- Consent of The Independent Liquid Terminals Association.
23.6* -- Consent of The New York Mercantile Exchange.
23.7* -- Consent of Oil Price Information Service.
23.8 -- Consent of Stewart McKelvey Stirling Scales.
27.1***** -- Financial Data Schedules (for electronic filing only).
</TABLE>
- ------------------------
* Previously filed.
** Incorporated by reference to the Registration Statement of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated
on Form S-4, dated December 20, 1996, and amendments thereto filed with
the U.S. Securities and Exchange Commission (Registration Statement
No. 333-18455), which became effective on February 14, 1997.
*** Incorporated by reference to the December 31, 1996 Form 10-K of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated,
dated May 13, 1997.
**** Incorporated by reference to the September 30, 1997 Form 10-Q of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated,
dated November 14, 1997.
***** Incorporated by reference to the December 31, 1997 Form 10-K of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated,
dated March 31, 1998.
****** Incorporated by reference to the December 31, 1998 Form 10-K of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated,
dated March 31, 1999.
<PAGE>
Exhibit 1
Form of Underwriting Agreement
_______________, 1999
Bear, Stearns & Co. Inc.
Morgan Stanley & Co. Incorporated
Prudential Securities Incorporated
Dain Rauscher Wessels,
a division of Dain Rauscher Incorporated
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies and Gentlemen:
Statia Terminals Group N.V., a Netherlands Antilles company (the
"Company"), agrees with Bear, Stearns & Co. Inc., Morgan Stanley & Co.
Incorporated, Prudential Securities Incorporated and Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated (the "Representatives"), subject to the
terms and conditions stated herein, to issue and sell to the Underwriters named
in Schedule I hereto (the "Underwriters") an aggregate of 7,600,000 shares (the
"Firm Shares") and, at the election of the Underwriters, up to 760,000
additional shares (the "Optional Shares") of common shares, par value $0.01 per
share (the "Common Shares") of the Company (the Firm Shares and the Optional
Shares that the Underwriters elect to purchase pursuant to Section 2 hereof
being collectively called the "Shares"). Statia Terminals Group N.V., Statia
Terminals International N.V., Statia Terminals Corporation N.V., Statia
Terminals N.V., Saba Trustcompany N.V., Bicen Development Corporation N.V.,
Seven Seas Steamship Company (Sint Eustatius) N.V., Statia Laboratory Services
N.V., Statia Tugs N.V. (collectively, the "Netherlands Antilles Subsidiaries"),
Statia Terminals Canada, Incorporated, Point Tupper Marine Services Limited Nova
Scotia (together, the "Canadian Subsidiaries"), Statia Terminals New Jersey,
Inc., Statia Terminals Delaware, Inc., Statia Terminals, Inc., W.P. Company,
Inc., Seven Seas Steamship Company, Inc. (collectively, the "U.S. Subsidiaries")
[and Petroterminal de Panama, S.A.] are referred to herein as the
"Subsidiaries."
1
<PAGE>
1. The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) The Company is eligible to file a Form S-1 with the
Securities and Exchange Commission (the "Commission") to register
securities for sale in the United States and a registration statement
on Form S-1 (File No. 333-72317) (the "Initial Registration
Statement") in respect of the Shares has been filed with the
Commission; the Initial Registration Statement and any post-effective
amendment thereto, each in the form heretofore delivered to you, and,
excluding exhibits thereto, for each of the other Underwriters, have
been declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering
(a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"),
which became effective upon filing, no other document with respect to
the Initial Registration Statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the
Initial Registration Statement, any post-effective amendment thereto
or the Rule 462(b) Registration Statement, if any, has been issued
and no proceeding for that purpose has been initiated or threatened
by the Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under the Act
is hereinafter called a "Preliminary Prospectus"); the various parts
of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including the information contained in the form of final prospectus
filed with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the Initial Registration Statement at the
time it was declared effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes
effective, each as amended at the time such part of the registration
statement became effective, are hereinafter collectively called the
"Registration Statement"; and such final prospectus, in the form
first filed pursuant to Rule 424(b) under the Act, is hereinafter
called the "Prospectus";
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in
all material respects to the requirements of the Act and the rules
and regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through Bear, Stearns & Co. Inc.
expressly for use therein;
(iii) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration
Statement or the Prospectus will conform,
2
<PAGE>
in all material respects to the requirements of the Act and the rules
and regulations of the Commission thereunder and do not and will not,
as of the applicable effective date as to the Registration Statement
and any amendment thereto and, as of the applicable filing date as to
the Prospectus and any amendment or supplement thereto, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through Bear, Stearns & Co. Inc.
expressly for use therein;
(iv) Except for Statia Terminals Virgin Islands Corporation,
which is an inactive subsidiary with minimal or no assets and is
currently being liquidated, upon the closing of the offering, the
Subsidiaries will be the only direct or indirect subsidiaries of the
Company. Upon the closing of the offering, the Company will own 100%
of the outstanding capital stock and other securities evidencing
equity ownership of the Subsidiaries, in each case free and clear of
any pledge, fiduciary transfer, security interest, claim, lien,
limitation on voting rights or encumbrance, and all such securities
will have been duly authorized and validly issued, fully paid and
nonassessable and will not have been issued in violation of, or
subject to, any preemptive or similar rights. Upon the closing of the
offering, there will not be any outstanding rights, warrants or
options to acquire, or instruments convertible into or exchangeable
for, any shares of capital stock or other equity interest of any
Subsidiary;
(v) Neither the Company nor any of the Subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus any material loss or interference with its
business from fire, collision, grounding, spill, explosion, flood,
hurricane, storm or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth in the Prospectus; and,
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any
change in the capital stock or long-term debt of the Company or any
of the Subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
shareholders' equity, results of operations or prospects of the
Company and the Subsidiaries, otherwise than as set forth in the
Prospectus;
(vi) The Company and the Subsidiaries have good and marketable
title to all real and personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect
the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and the
Subsidiaries; and any real property and buildings held under lease by
the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and the
Subsidiaries;
3
<PAGE>
(vii) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
Netherlands Antilles and has all requisite corporate power and
authority, and all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from regulatory or
governmental officials, bodies and tribunals, except where the
failure to obtain such authorizations, approvals, orders, licenses,
certificates and permits would not result in a Material Adverse
Effect (as defined below), to carry on its business as it is
currently being conducted and as described in the Prospectus and own,
lease, license and operate its respective properties in accordance
with its business as currently conducted. The Company is duly
qualified and in good standing as a foreign corporation authorized to
do business in each jurisdiction in which the nature of its business
or its ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not, either
individually or in the aggregate, result in a Material Adverse
Effect. A "Material Adverse Effect" means any material adverse effect
on the business, condition (financial or other), properties, assets,
liabilities, results of operations or prospects of the Company and
the Subsidiaries taken as a whole;
(viii) Each of the Subsidiaries has been duly incorporated or
organized, as the case may be, is validly existing as a corporation
in good standing under the laws of its respective jurisdiction of
incorporation and has all requisite corporate power and authority,
and all necessary authorizations, approvals, orders, licenses,
certificates and permits of and from regulatory or governmental
officials, bodies and tribunals, except where the failure to obtain
such authorizations, approvals, orders, licenses, certificates and
permits would not result in a Material Adverse Effect, to carry on
its business as it is currently being conducted and as described in
the Prospectus and own, lease, license and operate its respective
properties in accordance with its business as currently conducted.
Each of the Subsidiaries is duly qualified and in good standing as a
foreign corporation authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing of
property requires such qualification, except where the failure to be
so qualified would not, either individually or in the aggregate,
result in a Material Adverse Effect;
(ix) The Company has all requisite corporate power and
authority to execute, deliver and perform all of its obligations
under this Agreement and to consummate the transactions contemplated
by this Agreement and, without limitation, the Company has all
requisite corporate power and authority to issue, sell and deliver
the Shares;
(x) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description of the
Common Shares contained in the Prospectus; and all of the issued
shares of capital stock of each Subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable and are
owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims; the holders of the
outstanding shares of capital stock of the Company are not entitled
to preemptive or other rights to acquire the Shares; as of the date
4
<PAGE>
hereof there are no outstanding securities convertible into or
exchangeable for, or warrants, rights or options to purchase from the
Company, or obligations of the Company to issue, the Common Shares or
any other class of capital stock of the Company (except as set forth
in the Prospectus) and there are no restrictions on subsequent
transfers of the Shares under the laws of the Netherlands Antilles
(except as set forth in the Prospectus), Canada or of the United
States;
(xi) The Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and,
when issued and delivered against payment therefor as provided
herein, will be duly and validly issued and fully paid and
non-assessable and will conform to the description of the Common
Shares contained in the Prospectus;
(xii) All consents, approvals, authorizations, orders,
registrations, clearances and qualifications of or with any court or
governmental agency or body or any stock exchange authorities
(hereinafter referred to as a "Governmental Agency") having
jurisdiction over the Company, any of the Subsidiaries or any of
their properties or any stock exchange authorities (hereinafter
referred to as "Governmental Authorizations") required for the due
authorization, execution, delivery and performance by the Company of
this Agreement have been obtained or made and are in full force and
effect;
(xiii) This Agreement has been duly authorized, executed and
delivered by the Company;
(xiv) All dividends and other distributions declared and
payable on the shares of capital stock of the Company may under the
current laws and regulations of the Netherlands Antilles be paid in
United States Dollars that may be freely transferred out of the
Netherlands Antilles, and all such dividends and other distributions
will not be subject to withholding or other taxes under the laws and
regulations of the Netherlands Antilles and are otherwise free and
clear of any other tax withholding or deduction in the Netherlands
Antilles and without the necessity of obtaining any Governmental
Authorization in the Netherlands Antilles;
(xv) All dividends and other distributions declared and
payable on the shares of capital stock of the Company may under the
current laws and regulations of Canada be paid in United States
Dollars that may be freely transferred out of Canada, and all such
dividends and other distributions will not be subject to withholding
or other taxes under the laws and regulations of Canada and are
otherwise free and clear of any other tax withholding or deduction in
Canada and without the necessity of obtaining any Governmental
Authorization in Canada;
(xvi) The issue and sale of the Shares to be sold by the
Company hereunder and the compliance by the Company with all of the
provisions of this Agreement will not violate, conflict with or
constitute a breach of any of the terms or provisions of, or a
default under (or
5
<PAGE>
an event that with notice or the lapse of time, or both, would
constitute a default), or require consent under, or result in the
creation or imposition of a lien, charge or encumbrance on any
property or assets of the Company or any of the Subsidiaries or an
acceleration of any indebtedness of any of the Company or the
Subsidiaries pursuant to (A) the charter, constitutive documents or
bylaws of either of the Company or any of the Subsidiaries, (B) any
Material Agreement (as defined below), (C) any statute, rule or
regulation applicable to the Company or any of the Subsidiaries or
their assets or properties or (D) any judgment, order or decree of
any domestic or foreign court or governmental agency or authority
having jurisdiction over any of the Company or the Subsidiaries or
their assets or properties that, in the case of clauses (B), (C) and
(D) above, would result in a Material Adverse Effect. No consent,
approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, any court or
governmental agency, body or administrative agency, domestic or
foreign, is required to be obtained or made by the Company for the
execution, delivery and performance by the Company and the
Subsidiaries of this Agreement, except (x) such as have been or will
be obtained or made prior to the closing of this offering, (y) such
as may be required by the National Association of Securities Dealers,
Inc. (" NASD"). No consents or waivers from any other person or
entity are required for the execution, delivery and performance of
this Agreement other than such consents and waivers as have been or
will be obtained [prior to the closing of this offering];
(xvii) Neither the Company nor any of the Subsidiaries is (A)
in violation of its charter, constitutive documents or bylaws, (B) in
default (or, with notice or lapse of time or both, would be in
default) in the performance or observance of any obligation,
agreement, covenant or condition contained in any bond, debenture,
note, indenture, mortgage, deed of trust, loan agreement, note,
lease, license, franchise agreement, authorization, permit,
certificate or other agreement or instrument to which any of them is
a party or by which any of them is bound or to which any of their
assets or properties is subject (collectively, "Material Agreements")
or (C) in violation of any law, statute, rule, regulation, judgment
or court decree of any domestic or foreign court with jurisdiction
over any of them or any of their assets or properties or other
governmental or regulatory authority, agency or other body, that, in
the case of clauses (B) and (C) above, would result in a Material
Adverse Effect. There exists no condition that, with notice, the
passage of time or otherwise, would constitute a default by either
the Company or any of the Subsidiaries under any such document or
instrument or result in the imposition of any penalty or the
acceleration of any indebtedness, other than penalties, defaults or
conditions that would not result in a Material Adverse Effect;
(xviii) No stamp or other issuance or transfer taxes or duties
and no capital gains, income, withholding or other taxes are payable
by or on behalf of the Underwriters to the Netherlands Antilles or
Canada or any political subdivision or taxing authority thereof or
therein in connection with the sale and delivery by the Company to or
for the respective accounts of the Underwriters or the sale and
delivery outside the Netherlands Antilles or Canada by the
Underwriters of the Shares to the initial purchasers thereof;
6
<PAGE>
(xix) Neither the Company nor any of the Subsidiaries has
taken, directly or indirectly, any action that was designed to or
that has constituted or which that reasonably be expected to cause or
result in stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Shares;
(xx) The statements set forth in the Prospectus under the
caption "Description of Common Shares", insofar as they purport to
constitute a summary of the terms of the Common Shares, under the
captions "Risk Factors--Risks Inherent in Our Business," "Cash
Available for Payment of Dividends," "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
"Business," "Certain Relationships and Related Transactions" and
"Taxation," and under the caption "Plan of Distribution," insofar as
they purport to describe the provisions of the laws and documents
referred to therein, are accurate, complete and fair;
(xxi) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of the Subsidiaries is a party or of which any property of the
Company or any of the Subsidiaries is the subject which, if
determined adversely to the Company or any of the Subsidiaries, would
individually or in the aggregate have a material adverse effect on
the current or future consolidated financial position, shareholders'
equity, results of operations or prospects of the Company and the
Subsidiaries; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by any Governmental Agency
or threatened by others;
(xxii) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company"
or an entity "controlled" by an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(xxiii) The Company is not a Passive Foreign Investment
Company ("PFIC") within the meaning of Section 1296 of the United
States Internal Revenue Code of 1986, as amended, and is not likely
to become a PFIC;
(xxiv) Neither the Company nor any of the Subsidiaries or, to
the knowledge of the Company and the Subsidiaries, any employee or
agent of the foregoing has made any payment of funds or received or
retained any funds in violation of any law, rule or regulation or of
a character required to be disclosed in the Prospectus;
(xxv) The Company and each of the Subsidiaries have all
licenses, franchises, permits, authorizations, approvals and orders
and other concessions of and from all Governmental Agencies that are
necessary to own or lease their other properties and conduct their
businesses as described in the Prospectus;
7
<PAGE>
(xxvi) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075 of the Florida
Statutes;
(xxvii) At _____, the Company would have had, on the
consolidated pro forma basis indicated in the Prospectus (and any
amendment or supplement thereto), a capitalization as set forth
therein. The financial statements (including the related notes and
supporting schedules) included in the Registration Statement, the
Preliminary Prospectus and the Prospectus (and any amendment or
supplement thereto) present fairly in all material respects the
financial position, results of operations and cash flows of the
Company and its consolidated subsidiaries purported to be shown
thereby on the basis stated therein at the respective dates or for
the respective periods that have been prepared in accordance with
generally accepted accounting principles in the United States ("U.S.
GAAP") consistently applied throughout the periods involved. The
selected historical and pro forma information set forth in the
Registration Statement, the Preliminary Prospectus and the Prospectus
(and any amendment or supplement thereto) under the caption "Selected
Consolidated Financial Data" are accurately presented in all material
respects and prepared on a basis consistent with the audited and
unaudited historical consolidated financial statements and pro forma
financial statements from which that have been derived. The pro forma
financial statements of the Company included in the Registration
Statement, the Preliminary Prospectus and the Prospectus (and any
amendment or supplement thereto) have been prepared in all material
respects in accordance with the applicable accounting requirements of
Article 11 of Regulation S-X of the Commission; the assumptions used
in the preparation of such pro forma financial statements are, in the
opinion of the management of the Company, reasonable; and the pro
forma adjustments reflected in such pro forma financial statements
have been properly applied to the historical amounts in compilation
of such pro forma financial statements;
(xxviii) The Company and each of the Subsidiaries make and
keep books, records and accounts, which, in reasonable detail,
accurately and fairly reflect their respective transactions and
dispositions of assets, and maintain systems of internal accounting
controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or
specific authorization, (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with U.S.
GAAP and to maintain accountability for assets, (C) access to assets
is permitted only in accordance with management's general or specific
authorization, and (D) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences;
(xxix) Arthur Andersen LLP, which has certified certain
financial statements of the Company and the Subsidiaries are
independent public accountants as required by the Act and the rules
and regulations of the Commission thereunder;
8
<PAGE>
(xxx) No labor disturbance by the employees of any of the
Company or the Subsidiaries exists or, to the actual knowledge of the
Company or the Subsidiaries, is imminent that might reasonably be
expected to have a Material Adverse Effect; the Company and the
Subsidiaries are in compliance in all respects with, as applicable
and except where a failure to so comply would not have a Material
Adverse Effect, (A) all presently applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder
("ERISA") or (B) any similar Netherlands Antilles or Canadian federal
or provincial legislation; no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company or the Subsidiaries would have any
liability; none of the Company or the Subsidiaries has incurred or
expects to incur liability under (1) Title IV of ERISA with respect
to termination of, or withdrawal from, any "pension plan" or (2)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as
amended, including the regulations and published interpretations
thereunder (the "Code"); each "pension plan" that is maintained or
contributed to by the Company or the Subsidiaries that is intended to
be qualified under Section 401(a) of the Code is so qualified and
nothing has occurred, whether by action or by failure to act, that
would cause the loss of such qualification; and each employee benefit
or pension plan that the Company or the Subsidiaries (as applicable)
maintain or to which they are obligated to contribute and that is
subject to the Pension Benefits Standards Act, 1985 (Canada), to any
other Canadian federal law regulating employee benefit or pension
plans or to any provincial law regulating employee benefit plans (a
"Canadian Plan") is in compliance in all material respects with such
laws, to the extent applicable. Neither the Company nor any of the
Subsidiaries has incurred any material liability under any such
Canadian Plan or otherwise on account of any failure to meet the
contribution or minimum funding requirements applicable to, or the
administration or termination of, any such Canadian Plan, and no
event has occurred and no conditions exist that present a material
risk that the Company or the Subsidiaries (as applicable) will incur
liabilities on account of the foregoing circumstances that are
material in the aggregate;
(xxxi) The Company and each of the Subsidiaries maintain
insurance covering their respective properties, assets, operations,
personnel and businesses, and such insurance is of such type and in
such amounts in accordance with customary industry practice to
protect the Company and the Subsidiaries and their businesses.
Neither the Company nor any of the Subsidiaries has received notice
from any insurer or agent of such insurer that any material capital
improvements or other material expenditures will have to be made in
order to continue any insurance maintained by any of them other than
capital improvements and other expenditures that have been budgeted
by the Company and the Subsidiaries, as the case may be;
(xxxii) The offering and sale of the Common Shares as
contemplated by this Agreement does not give rise to any rights,
other than those that have been waived or satisfied, for or relating
to the registration of any capital stock or other securities of the
Company;
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(xxxiii) All tax returns required to be filed by the Company
and each of the Subsidiaries have been filed in all jurisdictions
where such returns are required to be filed; and all taxes, including
withholding taxes, penalties and interest, assessments, fees and
other charges due or claimed to be due from such entities or that are
due and payable have been paid, other than those being contested in
good faith and for which reserves have been provided in accordance
with generally accepted accounting principles or those currently
payable without penalty or interest, except where the failure to make
any such filing or payment would not have a Material Adverse Effect.
To the knowledge of the Company and each of the Subsidiaries, there
are no material proposed additional tax assessments against any of
them or their assets or property;
(xxxiv) Except as otherwise described in the Prospectus, the
Company and the Subsidiaries are (A) in compliance with any and all
applicable foreign, federal, provincial, state and local laws and
regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (B) have received
all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses
and (C) are in compliance with all terms and conditions of any such
permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals would not, singly or in the aggregate, have a
Material Adverse Effect on the Company and the Subsidiaries, taken as
a whole;
(xxxv) Except as otherwise described in the Prospectus, in the
ordinary course of its business, the Company conducts a periodic
review of the effect of Environmental Laws on the business,
operations and properties of the Company and the Subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of such review,
the Company has reasonably concluded that such associated costs and
liabilities would not, singly or in the aggregate, have a Material
Adverse Effect on the Company and the Subsidiaries, taken as a whole;
and the description in the Registration Statement of the agreement of
Praxair, Inc. to pay certain environmental costs of the Company is
accurate in all material respects and such agreement is in full force
and effect;
(xxxvi) As of __________, neither the Company nor any of the
Subsidiaries had any material liabilities or obligations, direct or
contingent, that were not set forth in the Company's consolidated
balance sheet as of December 31, 1998 or in the notes thereto. Since
December 31, 1998 and up to the Closing Date (as defined in Section 4
hereof), except as set forth in the Prospectus, (A) neither the
Company nor any of the Subsidiaries has (1) incurred any liabilities
or obligations, direct or contingent, that are not in the ordinary
course of business that would have a Material Adverse Effect or (2)
entered into any material transaction not in the ordinary course of
business, (B) there has not been any event or development in respect
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of the business, development or financial condition of the Company or
any of the Subsidiaries that would, either individually or in the
aggregate, result in a Material Adverse Effect and (C) there has been
no dividend or distribution of any kind declared, paid or made by
either the Company or any of the Subsidiaries on any class of their
capital stock;
(xxxvii) Except as described under the caption "Certain
Relationships and Related Transactions" in the Prospectus, there are
no contracts, agreements or understandings between the Company or any
of the Subsidiaries and any other person other than the Underwriters
that would give rise to a valid claim against the Company, the
Subsidiaries or the Underwriters for a brokerage commission, finder's
fee or like payment in connection with the issuance, purchase and
sale of the Shares;
(xxxviii) No consent, approval, authorization, exemption,
order or decree of any Netherlands Antilles court or governmental or
regulatory agency or body not otherwise obtained prior to the closing
of this offering is required to permit Statia Terminals International
N.V. to effect payments of dividends on the Shares, if any, or any
payments on a non-judicial winding-up of Statia Terminals
International N.V., in United States dollars;
(xxxix) The statistical and market-related data included in
the Prospectus are based on or derived from sources that the Company
believe to be reliable and accurate in all material respects and
represent the Company's good faith estimates that are made on the
basis of data derived from such sources;
(xl) The Company has reviewed its operations and that of the
Subsidiaries to evaluate the extent to which the business or
operations of the Company or any of its Subsidiaries will be affected
by the Year 2000 Problem (as defined below). As a result of such
review, (A) the Company has no reason to believe, and does not
believe, that (1) there are any issues related to the Company's
preparedness to address the Year 2000 Problem that are of a character
required to be described or referred to in the Registration Statement
or Prospectus that have not been accurately described in the
Registration Statement or Prospectus and (2) the Year 2000 Problem
will not have a Material Adverse Effect on the condition, financial
or otherwise, or on the earnings, business or operations of the
Company and the Subsidiaries, taken as a whole, or result in any
material loss or interference with the business or operations of the
Company and the Subsidiaries, taken as a whole; and (B) the Company
reasonably believes, after due inquiry, that the suppliers, vendors,
customers or other material third parties used or served by the
Company and the Subsidiaries are addressing or will address the Year
2000 Problem in a timely manner, except to the extent that a failure
to address the Year 2000 Problem by any supplier, vendor, customer or
material third party would not have a Material Adverse Effect on the
condition, financial or otherwise, or on the earnings, business or
operations of the Company and the Subsidiaries, taken as a whole. The
"Year 2000 Problem" as used herein means any significant risk that
computer hardware or software used in the receipt, transmission,
processing, manipulation, storage, retrieval, retransmission or other
utilization of data or in the operation of mechanical or
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electrical systems of any kind will not, in the case of dates or time
periods occurring after December 31, 1999, function at least as
effectively as in the case of dates or time periods occurring prior
to January 1, 2000;
(xli) Each certificate signed by any officer of the Company or
any of the Subsidiaries and delivered to the Underwriters or counsel
for the Underwriters pursuant to, or in connection with, this
Agreement shall be deemed to be a representation and warranty by the
Company or the Subsidiaries to the Underwriter as to the matters
covered by such certificate; and
(xlii) The Company has not distributed and, prior to the later
of (A) the Closing Date and (B) the completion of the distribution of
the Shares, will not distribute any offering material in connection
with the offering and sale of the Shares other than the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or other
materials, if any, permitted by the Act.
2. Subject to the terms and conditions herein set forth herein (a)
the Company agrees to issue and sell to each of the Underwriters, and each of
the Underwriters agrees, severally and not jointly, to purchase from the
Company, at a purchase price per share of $________, the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I hereto and (b) in
the event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company agrees to issue and sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at the purchase price per share set
forth in clause (a) of this Section 2, that portion of the number of Optional
Shares as to which such election shall have been exercised (to be adjusted by
you so as to eliminate fractional shares) determined by multiplying such number
of Optional Shares by a fraction, the numerator of which is the maximum number
of Optional Shares that such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase
at their election, from time to time, up to 760,000 Optional Shares, at the
purchase price per share set forth in the paragraph above, for the sole purpose
of covering over-allotments in the sale of the Firm Shares. Any such election to
purchase Optional Shares may be exercised only by written notice from you to the
Company, given within a period of 30 calendar days after the date of this
Agreement, setting forth the aggregate number of Optional Shares to be purchased
and the date on which such Optional Shares are to be delivered, as determined by
you but in no event earlier than the Initial Closing Date (as defined in Section
4 hereof) or, unless you and the Company otherwise agree in writing, earlier
than two or later than ten business days after the date of such notice.
3. Upon the Company's authorization of the release of the Firm
Shares, the Underwriters propose to offer the Shares for sale to the public upon
the terms set forth in the Prospectus.
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4. The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Bear, Stearns & Co. Inc. may request upon at least forty-eight hours'
prior notice to the Company, shall be delivered by or on behalf of the Company
to Bear, Stearns & Co. Inc., through the facilities of the Depository Trust
Company ("DTC") for the account of such Underwriter, against payment by or on
behalf of such Underwriter of the purchase price therefor by wire transfer of
Federal (same day) funds to an account designated by the Company. The Company
will cause the certificates representing the Shares to be made available for
checking at least twenty-four hours prior to the Closing Date with respect
thereto at the office of DTC or its designated custodian (the "Designated
Office").
(a) The time and date of such delivery and payment shall be,
with respect to the Firm Shares, 9:30 a.m., New York City time, on __________,
1999 or such other time and date as Bear, Stearns & Co. Inc. and the Company may
agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New
York City time, on the date specified by Bear, Stearns & Co. Inc. in the written
notice given by Bear, Stearns & Co. Inc. of the Underwriters' election to
purchase such Optional Shares, or such other time and date as Bear, Stearns &
Co. Inc. and the Company may agree upon in writing. Such time and date for
delivery of the Firm Shares is herein called the "Initial Closing Date", such
time and date for delivery of the Optional Shares, if not the Initial Closing
Date, is herein called an "Option Closing Date", and each such time and date for
delivery is herein called a "Closing Date".
(b) The documents to be delivered at each Closing Date by or
on behalf of the parties hereto pursuant to Section 7 hereof, including the
cross receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7 hereof, will be delivered at the offices of
Andrews & Kurth L.L.P., 805 3rd Avenue, New York, New York 10022 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
such Closing Date. A meeting will be held at the Closing Location at _______,
New York City time, on the New York Business Day next preceding such Closing
Date, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus prior to
the last Closing Date that shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended
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Prospectus has been filed and to furnish you with copies thereof; to advise you,
promptly after it receives notice thereof, of the issuance by the Commission of
any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or Prospectus, of the suspension of the qualification of
the Shares for offering or sale in any jurisdiction, of the initiation or
threatened initiation of any proceeding for any such purpose, or of any request
by the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or suspending the use of
any Preliminary Prospectus or Prospectus or suspending any such qualification,
promptly to use its best efforts to obtain the withdrawal of such order;
(b) From time to time to promptly take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to time,
to furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may from time to time reasonably request, and, if the
delivery of a Prospectus is required at any time prior to the expiration of nine
months after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any events shall have occurred as a
result of which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus was delivered, not misleading, or, if
for any other reason it shall be necessary during such period to amend or
supplement the Prospectus in order to comply with the Act, to notify you and
upon your request to prepare and furnish without charge to each Underwriter and
to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the Prospectus
that will correct such statement or omission or effect such compliance, and in
case any Underwriter is required to deliver a prospectus in connection with
sales of any of the Shares at any time nine months or more after the time of
issue of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as you
may request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Act), an earnings statement of the Company and the Subsidiaries (which need
not be audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including, at the option of the
Company, Rule 158);
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(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the Prospectus
[and pursuant to an effective registration statement under the Act], not to
offer, sell, contract to sell, establish or increase a put equivalent position
relating to, or otherwise dispose of, except as provided hereunder, any
securities of the Company that are substantially similar to the Common Shares or
Subordinated Shares, including but not limited to any securities that are
convertible into, exchangeable for or derivative of, or that represent the right
to receive, Common Shares or Subordinated Shares or any such substantially
similar securities and not to register any Subordinated Shares under the Act,
purchase any Subordinated Shares or grant any options or warrants to purchase
Common Shares (in each case, other than issuances of Common Shares or
Subordinated Shares in connection with certain acquisitions or capital
improvements that are accretive on a per Share basis or pursuant to employee
stock option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Agreement), without the prior written consent of Bear, Stearns & Co. Inc. and
Morgan Stanley & Co. Incorporated;
(f) To furnish to its shareholders as soon as practicable
after the end of each fiscal year an annual report in English (including a
balance sheet and statements of income, shareholders' equity and cash flows of
the Company and its consolidated subsidiaries certified by independent public
accountants) and prepared in conformity with U.S. GAAP and, as soon as
practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of the
Company and the Subsidiaries for such quarter in reasonable detail and prepared
in accordance with U.S. GAAP;
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to shareholders, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any securities exchange
on which any class of securities of the Company is listed; and (ii) such
additional information concerning the business and financial condition of the
Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and the Subsidiaries are consolidated in reports furnished to its
shareholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds";
(i) Not to (and to cause the Subsidiaries not to) take,
directly or indirectly, any action which is designed to or that constitutes or
that might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company or facilitate the sale
or resale of the Shares;
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(j) To use its best efforts to list for quotation the Shares
on the New York Stock Exchange ("NYSE");
(k) During the period of three years after the last date of
original issuance of the Shares, the Company will not be or become an
"investment company" under the Investment Company Act; and
(l) To do and perform all things required to be done and
performed under this Agreement by it prior to or after the Closing Date and to
satisfy all conditions precedent applicable to it regarding the delivery of the
Shares.
6. The Company covenants and agrees with the several Underwriters
that the Company will pay all costs and expenses incident to the performance of
the obligations of the Company hereunder, including those in connection with:
(a) the fees, disbursements and expenses of the Company's counsel and the
Company's accountants in connection with the registration and delivery of the
Shares under the Act and all other reasonable fees and expenses in connection
with the preparation, printing, filing and distribution of the Registration
Statement (including financial statements and exhibits), any Preliminary
Prospectus and the Prospectus and all amendments and supplements thereto
including the mailing and delivering of copies thereof to the Underwriters and
dealers; (b) the cost of printing or producing any Agreement among Underwriters,
this Agreement, the Blue Sky Memorandum, closing documents (including
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Shares; (c) all expenses in connection with
the qualification of the Shares for offering and sale under state securities
laws as provided in Section 5(b) hereof, including filing fees and the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky survey; (d) all fees and
expenses in connection with listing the Shares on the NYSE; (e) the filing fees
incident to, and the fees and disbursements of counsel for the Underwriters in
connection with, securing any required review by the NASD of the terms of the
sale of the Shares; (f) the cost of preparing stock certificates; (g) the cost
and charges of any transfer agent, registrar and/or depositary; (h) the cost of
issuance, transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon; (i) all miscellaneous expenses referred
to in Part II of the Registration Statement; (j) costs and expenses incurred by
the Company and its representatives relating to meetings with, and presentations
to, prospective purchasers of the Shares reasonably determined by the
Underwriters to be necessary or desirable to effect the sale of the Shares to
the public, including, without limitation, expenses associated with the
production of road show slides and graphics, travel and lodging expenses of the
representatives and officers of the Company, and the cost of any aircraft
chartered in connection with the road show; and (k) all other costs and expenses
incident to the performance of its obligations hereunder that are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel and any advertising expenses connected with any offers they may
make.
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7. As to the Shares to be delivered at each Closing Date, the
obligations of the Underwriters hereunder shall be subject, in their discretion,
to the conditions that all representations and warranties and other statements
of the Company herein are, at and as of such Closing Date, true and correct,
that the Company shall have performed all of its obligations hereunder required
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Act and in accordance with Section
5(a) hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the Commission; and all
requests for additional information on the part of the Commission shall have
been complied with to your reasonable satisfaction;
(b) Andrews & Kurth L.L.P., counsel for the Underwriters,
shall have furnished to you such written opinion or opinions, dated such Closing
Date, with respect to the matters covered in paragraphs [(i), (ii), (v), (vii),
and (xvii)] of subsection (c) below as well as such other related matters as you
may reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(c) White & Case LLP, counsel for the Company shall have
furnished to you their written opinion, dated as of such Closing Date, in form
and substance satisfactory to you, to the effect that:
(i) This Agreement has been duly executed and delivered by the
Company;
(ii) Each of the U.S. Subsidiaries has been duly incorporated
and is validly existing as a company in good standing under the laws
of its respective jurisdiction of incorporation and is duly qualified
to transact business as a foreign corporation and is in good standing
under the laws of all other jurisdictions where the ownership or
leasing of its respective properties or the conduct of its respective
businesses requires such qualification (except where the failure to
be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect, with corporate power and authority to own
its properties and conduct its business as described in the
Prospectus. All of the issued shares of capital stock of each U.S.
Subsidiary have been duly and validly authorized and issued, are
fully paid and non-assessable, and are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances, equities
or claims (such counsel being entitled to rely in respect of the
opinion in this clause, in respect to matters of fact, upon
certificates of officers of the Company or the U.S. Subsidiaries,
provided that such counsel shall state that they believe that both
you and they are justified in relying upon such opinions and
certificates);
(iii) Under the laws of the State of New York relating to
personal jurisdiction, the Company has, pursuant to Section 14 of
this Agreement, validly and irrevocably submitted to the personal
jurisdiction of any state or federal court located in the Borough of
Manhattan, The City of New York, New York (each a "New York Court")
in any action arising out of
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or relating to this Agreement or the transactions contemplated
hereby, has validly and irrevocably waived any objection to the venue
of a proceeding in any such court, and has validly and irrevocably
appointed the Authorized Agent (as defined herein) as its authorized
agent for the purpose described in Section 14 hereof; and service of
process effected on such agent in the manner set forth in Section 14
hereof will be effective to confer valid personal jurisdiction over
the Company;
(iv) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of the Subsidiaries
is a party or of which any property of the Company or any of the
Subsidiaries is the subject which, if determined adversely to the
Company or any of the Subsidiaries would individually or in the
aggregate have a Material Adverse Effect on the current or future
consolidated financial position, shareholders' equity, results of
operations or prospects of the Company and the Subsidiaries taken as
a whole; and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by any Governmental Agency
or threatened by others;
(v) The Registration Statement became effective under the Act
on or prior to the date hereof; to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued under the
Act; and to the best of such counsel's knowledge, no proceedings
therefor have been initiated or threatened or are pending or
contemplated by the Commission;
(vi) The issue and sale of the Shares being delivered at such
Closing Date by the Company and the compliance by the Company with
all of the provisions of this Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with
or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to such
counsel to which the Company or any of the Subsidiaries is a party or
by which the Company or any of the Subsidiaries is bound or to which
any of the property or assets of the Company or any of the
Subsidiaries is subject, nor will such action result in any violation
of the provisions of the Articles of Incorporation of the Company or
any of the Subsidiaries or any statute or any order, rule or
regulation known to such counsel of any United States Federal or New
York Governmental Agency having jurisdiction over the Company or any
of the Subsidiaries or any of their properties;
(vii) No Governmental Authorization is required for the issue
and sale of the Shares, except the registration under the Act of the
Shares, and such consents, approvals, authorizations, registrations
or qualifications as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Shares by the Underwriters;
(viii) The Company and each of the Subsidiaries have all
licenses and concessions of and from all Governmental Agencies that
are necessary to own or lease their properties and
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conduct their businesses as described in the Prospectus; and the
Company and each of the Subsidiaries have all franchises, permits,
authorizations, approvals and orders and other licenses and
concessions of and from all Governmental Agencies that are necessary
to own or lease their other properties and conduct their businesses
as described in the Prospectus except where failure to obtain such
licenses, franchises, permits, authorizations, approvals and orders
will not have a Material Adverse Effect on the financial condition or
results of operations of the Company and the Subsidiaries;
(ix) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act
with respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities in
the securities registered pursuant to the Registration Statement or
in any securities being registered pursuant to any other registration
statement filed by the Company under the Act;
(x) Neither the Company nor any of the Subsidiaries is in
violation of or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which it
or any of its properties may be bound;
(xi) The statements set forth in the Prospectus under the
captions "The Offering," "The Restructuring," "Cash Dividend Policy,"
"Cash Available for Payment of Dividends--Restrictions Imposed by
Indenture," "Management," "Certain Relationships and Related
Transactions," "Description of Common Shares," "Descriptions of
Subordinated Shares," "Securities Eligible For Future Sale,"
"Taxation--United States Federal Income Taxation," and "Plan of
Distribution," insofar as they purport to describe the provisions of
the laws and regulations and documents referred to therein, are
accurate, complete and fair;
(xii) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act;
(xiii) The Company is not a PFIC within the meaning of Section
1296 of the Code, and is not likely to become a PFIC;
(xiv) No stamp or other issuance or transfer taxes or duties
and no capital gains, income, withholding or other taxes are payable
by or on behalf of the Underwriters to the United States or the State
of New York or to any political subdivision or taxing authority
thereof or therein in connection with (A) the sale and delivery by
the Company of the Shares to or for the respective accounts of the
Underwriters or (B) the sale and delivery outside the Netherlands
Antilles or Canada by the Underwriters of the Shares to the initial
purchasers thereof in the manner contemplated herein;
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(xv) The opinions of such counsel set forth in the Prospectus
under the caption "Taxation--United States Federal Income Taxation"
are confirmed as of such Closing Date;
(xvi) Except as disclosed in the Registration Statement and
Prospectus, there are no outstanding (A) securities or obligations of
the Company or any of the Subsidiaries convertible into or
exchangeable for any capital stock of the Company or any such
Subsidiary, (B) warrants, rights or options to subscribe for or
purchase from the Company or any Subsidiary any such capital stock or
any such convertible or exchangeable securities or obligations, or
(C) obligations of the Company or any Subsidiary to issue any shares
of capital stock, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or options;
(xvii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Closing Date (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of
the Act and the rules and regulations thereunder and they have no
reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior
to such Closing Date (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make
the statements therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Closing Date (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading or that, as of such Closing Date,
either the Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to such
Closing Date (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and
they do not know of any amendment to the Registration Statement
required to be filed or of any contracts or other documents of a
character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration Statement
or the Prospectus that are not filed or described as required.
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction outside the
United States.
(d) Smeets Thesseling Van Bokhorst Spigt, Netherlands Antilles
counsel for the Company shall have furnished to you their written opinion, dated
such Closing Date, in form and substance satisfactory to you, to the effect
that:
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(i) The Company and each of the Netherlands Antilles
Subsidiaries has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the Netherlands
Antilles, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company and each of the Netherlands Antilles Subsidiaries
(including the Shares being delivered at such Closing Date) have been
duly and validly authorized and issued and are fully paid and
non-assessable; the holders of outstanding shares of capital stock of
the Company are not entitled to preemptive or other rights to acquire
the Shares; and there are no restrictions on subsequent transfers of
the Shares and the Shares conform to the description of the Common
Shares contained in the Prospectus;
(iii) All of the issued shares of capital stock of each
Subsidiary of the Company are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims;
(iv) All Governmental Authorizations required for the Shares
to be duly and validly authorized and issued have been obtained or
made and are in full force and effect;
(v) The Company and each of the Netherlands Antilles
Subsidiaries has been duly qualified to transact business as a
foreign corporation and is in good standing under the laws of all
other jurisdictions where the ownership or leasing of its respective
properties or the conduct of its respective businesses requires such
qualification, or is subject to no material liability or disability
by reason of failure to be so qualified in any such jurisdiction
(such counsel being entitled to rely in respect of the opinion in
this clause upon opinions of local counsel and in respect of matters
of fact upon certificates of officers of the Company, provided that
such counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
(vi) Any real property and buildings held under lease by the
Company and each of the Netherlands Antilles Subsidiaries are held by
them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company
and each of the Netherlands Antilles Subsidiaries (in giving the
opinion in this clause, such counsel may state that no examination of
record titles for the purpose of such opinion has been made, and that
they are relying upon a general review of the titles of the Company
and each of the Netherlands Antilles Subsidiaries, upon opinions of
local counsel and abstracts, reports and policies of title companies
rendered or issued at or subsequent to the time of acquisition of
such property by the Company or any of the Netherlands Antilles
Subsidiaries, upon opinions of counsel to the lessors of such
property and, in respect to matters of fact, upon certificates of
officers of the Company or any of the Netherlands Antilles
Subsidiaries, provided that such
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counsel shall state that they believe that both you and they are
justified in relying upon such opinions, abstracts, reports, policies
and certificates);
(vii) To the best of such counsel's knowledge and other than
as set forth in the Prospectus, there are no legal or governmental
proceedings pending before any Governmental Agency in the Netherlands
Antilles to which the Company or any of the Netherlands Antilles
Subsidiaries is a party or of which any property of the Company or
any of the Netherlands Antilles Subsidiaries is the subject; and, to
the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by any Governmental Agency or threatened
by others;
(viii) This Agreement has been duly authorized, executed and
delivered by the Company;
(ix) The issuance and sale of the Shares being delivered at
such Closing Date and the compliance by the Company with all of the
provisions of this Agreement and the consummation of the transactions
herein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which the
Company is a party or by which the Company is bound or to which any
of the property or assets of the Company is subject, nor will such
action result in any violation of the provisions of the Articles of
Incorporation of the Company or any statute or any order, rule, or
regulation known to such counsel of any Governmental Agency having
jurisdiction over the Company or any of its properties;
(x) No Governmental Authorization of or with any Governmental
Agency is required in the Netherlands Antilles for the issuance and
sale of the Shares by the Company or the consummation by the Company
of the transactions contemplated by this Agreement;
(xi) The Company has all franchises, permits, authorizations,
approvals and orders and other licenses and concessions of and from
all Governmental Agencies in the Netherlands Antilles that are
necessary to own or lease its properties and conduct its businesses
as described in the Prospectus, except such licenses, franchises,
permits, authorizations, approvals and orders, where the failure to
obtain will not have a Material Adverse Effect on the financial
condition or results of operations of the Company;
(xii) The statements (A) in the Prospectus under the captions
"Enforceability of Civil Liabilities," "Risk Factors--Netherlands
Antilles law may limit the amount of dividends we can pay you," "Risk
Factors--Our board of directors may have conflicts of interest with
you," "Risk Factors--You may not be able to sue us effectively in the
Netherlands Antilles or Canada," "Risk Factors--A non-negotiated
change of control is unlikely," "Risk Factors--The beneficial tax
status of our facilities may end," "The Restructuring," "Use of
Proceeds," "Capitalization," "Cash Dividend Policy--Effect of
Issuance of Additional Shares," "Cash Available for Payment of
Dividends--Restrictions Imposed by Netherlands
22
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Antilles Law," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Political, Inflation, Currency
and Interest Rate Risks," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Tax Matters,"
"Business--Environmental, Health and Safety Matters,"
"Business--Employees," "Management--Directors and Executive
Officers," "Certain Relationships and Related Transactions--Board of
Directors," "Description of the Common Shares," and "Description of
the Subordinated Shares" and (B) in the Registration Statement in
Item 14, to the extent such statements relate to matters of
Netherlands Antilles law or regulation or to the provisions of
documents therein described, are true and accurate in all material
respects, and nothing has been omitted from such statements that
would make the same misleading in any material respect;
(xiii) No stamp or other issuance or transfer taxes or duties
and no capital gains, income, withholding or other taxes are payable
by or on behalf of the Underwriters to the Netherlands Antilles or to
any political subdivision or taxing authority thereof or therein in
connection with (A) the sale and delivery by the Company of the
Shares to or for the respective accounts of the Underwriters or (B)
the sale and delivery outside the Netherlands Antilles by the
Underwriters of the Shares to the initial purchasers thereof in the
manner contemplated herein;
(xiv) Insofar as matters of the laws of the Netherlands
Antilles are concerned, the Registration Statement and the filing of
the Registration Statement with the Commission have been duly
authorized by and on behalf of the Company; and the Registration
Statement has been duly executed pursuant to such authorization by
and on behalf of the Company;
(xv) The Company's agreement to the choice of law in Section
14 hereof will be recognized by the courts of the Netherlands
Antilles; the Company can sue and be sued in its own name under the
laws of the Netherlands Antilles; the irrevocable submission of the
Company to the exclusive jurisdiction of a New York Court, the waiver
by the Company of any objection to the venue of a proceeding of a New
York Court and the agreement of the Company that this Agreement shall
be governed and construed in accordance with the laws of the State of
New York are legal, valid and binding; service of process effected in
the manner set forth in Section 12 hereof will be effective, insofar
as the laws of the Netherlands Antilles are concerned, to confer
valid personal jurisdiction over the Company; and judgment obtained
in a New York Court arising out of or in relation to the obligations
of the Company under this Agreement will be enforceable against the
Company in the courts of the Netherlands Antilles;
(xvi) The indemnification and contribution provisions set
forth in Section 8 hereof do not contravene the public policy of the
laws of the Netherlands Antilles;
(xvii) All dividends and other distributions declared and
payable on the shares of capital stock of the Company may under the
current laws and regulations of the Netherlands
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Antilles be paid in United States Dollars that may be freely
transferred out of the Netherlands Antilles, and all such dividends
and other distributions will not be subject to withholding or other
taxes under the laws and regulations of the Netherlands Antilles and
are otherwise free and clear of any other tax, withholding or
deduction in the Netherlands Antilles and without the necessity of
obtaining any Governmental Authorization in the Netherlands Antilles;
and
(xviii) The Company is not in violation of its Articles of
Incorporation (which are in conformity with the laws of the
Netherlands Antilles) or in default in the performance or observance
of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which it is a party or by
which it or any of its properties may be bound.
In giving such opinion, such counsel may state that with
respect to all matters of United States federal and New York law,
they have relied upon the opinions of United States counsel for the
Company delivered pursuant to paragraph (c) of this Section 7.
(e) Stewart McKelvey Stirling Scales, Canadian counsel for Company
and the Canadian Subsidiaries shall have furnished to you their written opinion,
dated as of such Closing Date, in form and substance satisfactory to you, to the
effect that:
(i) Each of the Canadian Subsidiaries has been duly
incorporated and is validly existing as a company in good standing
under the laws of Canada, with corporate power and authority to own
its properties and conduct its business as described in the
Prospectus and all of the issued shares of capital stock of each
Canadian Subsidiary have been duly and validly authorized and issued,
are fully paid and non-assessable, and are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims (such counsel being entitled to rely in respect of
the opinion in this clause in respect to matters of fact upon
certificates of officers of the Company or the Canadian Subsidiaries,
provided that such counsel shall state that they believe that both
you and they are justified in relying upon such opinions and
certificates);
(ii) Any real property and buildings held under lease by the
Company and the Canadian Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and the Canadian
Subsidiaries (in giving the opinion in this clause, such counsel may
state that no examination of record titles for the purpose of such
opinion has been made, and that they are relying upon a general
review of the titles of the Company and the Canadian Subsidiaries,
upon opinions of local counsel and abstracts, reports and policies of
title companies rendered or issued at or subsequent to the time of
acquisition of such property by the Company or the Canadian
Subsidiaries, upon opinions of counsel to the lessors of such
property and, in respect to matters of fact, upon certificates of
officers of the Company or the Canadian Subsidiaries,
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<PAGE>
provided that such counsel shall state that they believe that both
you and they are justified in relying upon such opinions, abstracts,
reports, policies and certificates);
(iii) To the best of such counsel's knowledge and other than
as set forth in the Prospectus, there are no legal or governmental
proceedings pending before any Governmental Agency in Canada to which
the Company or any of the Canadian Subsidiaries is a party or of
which any property of the Company or any of the Canadian Subsidiaries
is the subject which, if determined adversely to the Company or any
of the Canadian Subsidiaries, would individually or in the aggregate
have a Material Adverse Effect on the current or future consolidated
financial position, shareholders' equity, results of operations or
prospects of the Company; and to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by any
Governmental Agency or threatened by others;
(iv) No Governmental Authorization of or with any Governmental
Agency is required in Canada for the issuance and sale of the Shares
by the Company or the consummation by the Company and each of the
Canadian Subsidiaries of the transactions contemplated by this
Agreement except those that have been obtained and are in full force
and effect;
(v) Each of the Canadian Subsidiaries has all licenses and
concessions of and from all Governmental Agencies that are necessary
to own or lease their properties and conduct their businesses as
described in the Prospectus; and each of the Canadian Subsidiaries
has all franchises, permits, authorizations, approvals and orders and
other licenses and concessions of and from all Governmental Agencies
that are necessary to own or lease their other properties and conduct
their businesses as described in the Prospectus except where the
failure to obtain such licenses, franchises, permits, authorizations,
approvals and orders, will not have a Material Adverse Effect on the
financial condition or results of operations of the Canadian
Subsidiaries;
(vi) None of the Canadian Subsidiaries is in violation of, or
in default in the performance or observance of, any material
obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any
of its properties may be bound;
(vii) To the best of such counsel's knowledge, neither of the
Company nor any of the Canadian Subsidiaries is in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to
which they are a party or by which they or any of their properties
may be bound or is in violation of its Articles of Incorporation or
By-laws;
(viii) The statements in the Prospectus under the captions
"Enforceability of Certain Civil Liabilities," "Risk Factors--You may
not be able to sue us effectively in the Netherlands
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Antilles or Canada," "Risk Factors--Environmental and Other
Regulations," "Risk Factors--Canadian income taxes could increase,"
"Management's Discussion and Analysis of Financial Condition and
Results of Operations--Environmental, Health and Safety Matters,"
"Management's Discussion and Analysis of Financial Condition and
Results of Operations--Tax Matters," "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Legal
Proceedings," "Business--Environmental, Health and Safety Matters,"
and "Business--Employees" are true and accurate in all material
respects, and nothing has been omitted from such statements that
would make the same misleading in any material respect;
(ix) Each of the Canadian Subsidiaries' agreement to the
choice of law in Section 14 hereof will be recognized by the courts
of Canada and each Canadian Subsidiary can sue and be sued in its own
name under the laws of Canada; the irrevocable submission of each
Canadian Subsidiary to the exclusive jurisdiction of a New York
Court, the waiver by each Canadian Subsidiary of any objection to the
venue of a proceeding of a New York Court and the agreement of each
Canadian Subsidiary that this Agreement shall be governed and
construed in accordance with the laws of the State of New York are
legal, valid and binding; service of process effected in the manner
set forth in Section 12 hereof will be effective, insofar as the laws
of Canada are concerned, to confer valid personal jurisdiction over
each Canadian Subsidiary; and judgment obtained in a New York Court
arising out of or in relation to the obligations of each Canadian
Subsidiary under this Agreement will be enforceable against each
Canadian Subsidiary in the courts of Canada; and
(x) No stamp or other issuance or transfer taxes or duties and
no capital gains, income withholding or other taxes are payable by or
on behalf of the Underwriters to Canada or to any political
subdivision or taxing authority thereof or therein in connection with
(A) the sale and delivery by the Company of the Shares to or for the
respective accounts of the Underwriters or (B) the sale and delivery
outside Canada by the Underwriters of the Shares to the initial
purchasers thereof in the manner contemplated herein.
In giving such opinion, such counsel may state that with
respect to all matters of United States federal and New York law,
they have relied upon the opinions of United States counsel for the
Company delivered pursuant to paragraph (c) of this Section 7.
(f) At the time this Agreement is executed and at each Closing Date,
you shall have received a letter, from Arthur Andersen LLP, independent public
accountants for the Company, dated, respectively, as of the date of this
Agreement and as of each Closing Date, and in form and substance satisfactory to
you, to the effect that:
(i) they are independent certified public accountants with
respect to the Company within the meaning of the Act and the
Regulations and stating that the answer to Item 10 of the
Registration Statement is correct insofar as it relates to them;
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(ii) in their opinion, the financial statements and schedules
of the Company included in the Registration Statement and the
Prospectus and covered by their opinion therein comply as to form in
all material respects with the applicable accounting requirements of
the Act and the Securities Exchange Act of 1934 (the "Exchange Act")
and the applicable published rules and regulations of the Commission
thereunder;
(iii) on the basis of procedures consisting of a reading of
the latest available unaudited interim consolidated financial
statements of the Company and its Subsidiaries, a reading of the
minutes of meetings and consents of the shareholders and boards of
directors of the Company and its Subsidiaries and the committees of
such boards subsequent to the date of the most recent audited
consolidated balance sheet of the Company and its Subsidiaries
included or incorporated by reference in the Registration Statement
and the Prospectus, inquiries of officers and other employees of the
Company and its Subsidiaries who have responsibility for financial
and accounting matters of the Company and its Subsidiaries with
respect to transactions and events subsequent to the date of the most
recent audited consolidated balance sheet of the Company and its
Subsidiaries included or incorporated by reference in the
Registration Statement and the Prospectus and other specified
procedures and inquiries to a date not more than five days prior to
the date of such letter, nothing has come to their attention that
would cause them to believe that: (A) the unaudited consolidated
financial statements and schedules of the Company presented in the
Registration Statement and the Prospectus do not comply as to form in
all material respects with the applicable accounting requirements of
the Act and, if applicable, the Exchange Act and the applicable
published rules and regulations of the Commission thereunder or that
such unaudited consolidated financial statements are not fairly
presented in conformity with generally accepted accounting principles
except to the extent certain footnote disclosures have been omitted
in accordance with applicable rules of the Commission under the
Exchange Act applied on a basis substantially consistent with that of
the audited consolidated financial statements included in the
Registration Statement and the Prospectus; (B) with respect to the
period subsequent to the date of the most recent consolidated balance
sheet of the Company and its Subsidiaries included or incorporated by
reference in the Registration Statement and the Prospectus there
were, as of the date of the most recent available monthly
consolidated financial statements of the Company and its
Subsidiaries, if any, and as of a specified date not more than five
days prior to the date of such letter, any changes in the capital
stock or long-term indebtedness of the Company or any decrease in the
net current assets or stockholders' equity of the Company, in each
case as compared with the amounts shown in the most recent balance
sheet presented in the Registration Statement and the Prospectus,
except for changes or decreases that the Registration Statement and
the Prospectus disclose have occurred or may occur or that are set
forth in such letter or (C) that during the period from the date
following the date of the most recent consolidated balance sheet of
the Company and its Subsidiaries included or incorporated by
reference in the Registration Statement and the Prospectus to the
date of the most recent available monthly consolidated financial
statements of the Company and its Subsidiaries, if any, and to a
specified date not more than five days prior to the date of such
letter, there was any decrease, as compared with the corresponding
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period in the prior fiscal year, in total revenues, or total or per
share net income, except for decreases that the Registration
Statement and the Prospectus disclose have occurred or may occur or
that are set forth in such letter;
(iv) they have compared specific dollar amounts, numbers of
shares, percentages of revenues and earnings, and other financial
information pertaining to the Company and its Subsidiaries set forth
in the Registration Statement and the Prospectus, which have been
specified by you prior to the date of this Agreement, to the extent
that such amounts, numbers, percentages, and information may be
derived from the general accounting and financial records of the
Company and its Subsidiaries or from schedules furnished by the
Company, and excluding any questions requiring an interpretation by
legal counsel, with the results obtained from the application of
specified readings, inquiries, and other appropriate procedures
specified by you set forth in such letter, and found them to be in
agreement; and
(v) any unaudited pro forma consolidated financial statements
included in the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have been properly applied to the historical amounts in
the compilation of those statements.
The Underwriters shall have also received at the time this Agreement is executed
and at each Closing Date an opinion (satisfactory in form and substance to the
Underwriters and counsel to the Underwriters), dated as of the relevant Closing
Date, of PricewaterhouseCoopers, special Netherlands Antilles tax counsel to the
Company and of Arthur Andersen, special Canadian tax counsel to the Company;
(g) (i) Neither the Company nor any of the Subsidiaries shall have
sustained, since the date of the latest audited financial statements included in
the Prospectus, any loss or interference with its business from fire, explosion,
collision, grounding, spill, flood, hurricane, storm or other calamity, whether
or not covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth in the Prospectus, and (ii)
since the respective dates as of which information is given in the Prospectus
there shall not have been any change in the capital stock or long-term debt of
the Company or any of the Subsidiaries or any change, or any development
involving a prospective change, in or affecting the general affairs, management,
financial position, shareholders' equity, results of operations or prospects of
the Company and the Subsidiaries, otherwise than as set forth in the Prospectus,
the effect of which, in any such case described in clause (i) or (ii), is in the
judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Closing Date on the terms and in the
manner contemplated in the Prospectus;
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(h) The Shares to be sold by the Company at such Closing Date shall
have been duly listed for quotation on the NYSE;
(i) Prior to or on the date hereof, the Company shall have obtained
and delivered to the Underwriters executed copies of an agreement from each of
the Company's officers and directors and such of its shareholders as have been
heretofore designated by you and listed on Schedule II attached hereto
substantially to the effect set forth in Subsection 5(e) hereof (providing for a
180-day "lock-up" period) in form and substance satisfactory to you;
(j) The Company shall have complied with Section 5(c) hereof with
respect to the furnishing of Prospectuses on the New York Business Day next
succeeding the date of this Agreement;
(k) The Company shall have furnished or caused to be furnished to you
at such Closing Date, certificates of officers thereof satisfactory to you as to
the accuracy of the representations and warranties of the Company herein, at and
as of such Closing Date, as to the performance by such parties of all of their
respective obligations hereunder to be performed at or prior to such Closing
Date, and as to such other matters as you may reasonably request and the Company
shall have furnished or caused to be furnished certificates as to matters set
forth in subsections (a) and (g) of this Section, and as to such other matters
as you may reasonably request;
(l) Andrews & Kurth L.L.P., counsel to the Underwriters, shall have
been furnished with such documents as they may reasonably request to enable them
to review or pass upon the matters referred to in this Section 7 and in order to
evidence the accuracy, completeness or satisfaction in all material respects of
any of the representations, warranties or conditions contained in this
Agreement; and
(m) The Underwriters shall have received written advice from the NASD
that the NASD raises no objection with respect to the fairness and
reasonableness of the underwriting terms and arrangements for the offering of
the Common Shares.
8. (a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against
any and all losses, liabilities, claims, damages and expenses whatsoever as
incurred (including, but not limited to, attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement for the registration of the Shares, as originally filed or any
amendment thereof, or any related preliminary prospectus or the Prospectus, or
in any supplement thereto or amendment thereof, or arise out of or are based
upon the omission
29
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or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Company will not be liable in any such case to the extent but
only to the extent that any such loss, liability, claim, damage or expense
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter through you expressly for use therein. This indemnity agreement
will be in addition to any liability which the Company may otherwise have,
including under this Agreement.
(b) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the Company,
each of the officers of the Company who shall have signed the Registration
Statement, and each other person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against
any losses, liabilities, claims, damages and expenses whatsoever as incurred
(including, but not limited to, attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), jointly or severally, to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement for the registration of the Shares, as originally filed or any
amendment thereof, or any related preliminary prospectus or the Prospectus, or
in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Underwriter through you
expressly for use therein; provided, however, that in no case shall any
Underwriter be liable or responsible for any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder. This indemnity will be in addition to any liability which any
Underwriter may otherwise have, including under this Agreement. The Company
acknowledges that the statements set forth in the last paragraph of the cover
page and in the Section "Plan of Distribution" in the Prospectus constitute the
only information furnished in writing by or on behalf of any Underwriter
expressly for use in the Registration Statement relating to the Shares as
originally filed or in any amendment thereof, any related preliminary prospectus
or the Prospectus or in any amendment thereof or supplement thereto, as the case
may be.
30
<PAGE>
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties. Anything in
this subsection to the contrary notwithstanding, an indemnifying party shall not
be liable for any settlement of any claim or action effected without its written
consent; provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for contribution in circumstances in
which the indemnification provided for in this Section 8 is for any reason held
to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, the Company and the Underwriters shall
contribute to the aggregate losses, claims, damages, liabilities and expenses of
the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company any contribution received by
the Company from persons, other than the Underwriters, who may also be liable
for contribution, including persons who control the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, officers of the
Company who signed the Registration Statement and directors of the Company) as
incurred to which the Company and one or more of the Underwriters may be
subject, in such proportions as is appropriate to reflect the relative benefits
received by
31
<PAGE>
the Company and the Underwriters from the offering of the Shares or, if such
allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice as
provided in this Section 8 hereof, in such proportion as is appropriate to
reflect not only the relative benefits referred to above but also the relative
fault of the Company and the Underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Underwriters shall be deemed to be in
the same proportion as (x) the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company and (y) the underwriting discounts and commissions received by
the Underwriters, respectively, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company and of the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) in no case shall any Underwriter be liable or responsible
for any amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 8 and the
preceding sentence, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. For purposes of this Section 8, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, each officer of the Company who
shall have signed the Registration Statement and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to clauses (i) and (ii) of this Section 8(d). Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties, notify each party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have under this Section 8 or
otherwise. No party shall be liable for contribution with respect to any action
or claim settled without its consent; provided, however, that such consent was
not unreasonably withheld.
9. If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Additional Shares hereunder, and if the
Firm Shares or Additional Shares with respect to which such default relates do
not (after giving effect to arrangements, if any, made by you pursuant to
subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares
or Additional Shares, to which the default relates shall be purchased by the
non-defaulting Underwriters in proportion to the respective proportions that the
numbers of Firm Shares set forth opposite their
32
<PAGE>
respective names in Schedule I hereto bears to the aggregate number of Firm
Shares set forth opposite the names of the non-defaulting Underwriters.
(a) In the event that such default relates to more than 10% of
the Firm Shares or Additional Shares, as the case may be, you may in your
discretion arrange for yourself or for another party or parties (including any
non-defaulting Underwriter or Underwriters who so agree) to purchase such Firm
Shares or Additional Shares, as the case may be, to which such default relates
on the terms contained herein. In the event that within 5 calendar days after
such a default you do not arrange for the purchase of the Firm Shares or
Additional Shares, as the case may be, to which such default relates as provided
in this Section 9, this Agreement or, in the case of a default with respect to
the Additional Shares, the obligations of the Underwriters to purchase and of
the Company to sell the Additional Shares shall thereupon terminate, without
liability on the part of the Company with respect thereto (except in each case
as provided in Section 6, 8(a) and 8(d) hereof) or the Underwriters, but nothing
in this Agreement shall relieve a defaulting Underwriter or Underwriters of its
or their liability, if any, to the other Underwriters and the Company for
damages occasioned by its or their default hereunder.
(b) In the event that the Firm Shares or Additional Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
you or the Company shall have the right to postpone the Closing Date for a
period, not exceeding five business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus or
in any other documents and arrangements, and the Company agrees to file promptly
any amendment or supplement to the Registration Statement or the Prospectus
which, in the opinion of Underwriters' Counsel, may thereby be made necessary or
advisable. The term "Underwriter" as used in this Agreement shall include any
party substituted under this Section 9 with like effect as if it had originally
been a party to this Agreement with respect to such Firm Shares and Additional
Shares.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company, or any
controlling person and shall survive delivery of and payment for the Shares.
11. (a) This Agreement shall become effective, upon the later of
when (i) you and the Company shall have received notification of the
effectiveness of the Registration Statement or (ii) the execution of this
Agreement. If either the initial public offering price or the purchase price per
Share has not been agreed upon prior to 5:00 P.M., New York time, on the fifth
full business day after the Registration Statement shall have become effective,
this Agreement shall thereupon terminate without liability to the Company or the
Underwriters except as herein expressly provided. Until this Agreement becomes
effective as aforesaid, it may be terminated by the Company by notifying you or
33
<PAGE>
by you notifying the Company. Notwithstanding the foregoing, the provisions of
this Section 11 and of Sections 1, 6 and 8 hereof shall at all times be in full
force and effect.
(b) You shall have the right to terminate this Agreement at
any time prior to the Closing Date or the obligations of the Underwriters to
purchase the Optional Shares at any time prior to an Option Closing Date, as the
case may be, if (i) any domestic or international event or act or occurrence has
materially disrupted, or in your opinion will in the immediate future materially
disrupt, the market for the Company's securities or securities in general; (ii)
the Commission or the NYSE suspends trading in the Common Shares or there is a
suspension or material limitation of trading on the NYSE or on the Nasdaq
National Market, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices for securities have been required, on the NYSE by the
NYSE or by order of the Commission or any other governmental authority having
jurisdiction; (iii) there has been any downgrading in the rating of any of the
Company's debt securities by any "nationally recognized statistical
rating-organization" (as defined for purposes of Rule 436(g) under the Act), or
any public announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iv) a banking
moratorium has been declared by a state or federal authority or a new
restriction materially adversely affecting the distribution of the Shares; (v) a
change or development involving a prospective change in the United States,
Netherlands Antilles or Canada taxation affecting the Company, the Shares or the
transfer thereof or the imposition of exchange controls by such countries has
occurred; (vi) an outbreak or escalation of hostilities has occurred involving
the United States, Netherlands Antilles or Canada or any of the Persian Gulf
States (as defined below) or the declaration by the United States, the
Netherlands Antilles, Canada or any of the Persian Gulf States of a national
emergency or war, if the effect of any such event specified in this clause (vi)
in the judgment of the Representatives makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being delivered
at such Closing Date on the terms and in the manner contemplated in the
Prospectus; or (vii) there is an occurrence of any material adverse change in
the existing financial, political or economic conditions in the United States,
Netherlands Antilles or Canada or any of the Persian Gulf States or elsewhere
which, in the judgment of the Representatives would materially and adversely
affect the financial markets or the market for the Shares and other equity
securities. For purposes of this Agreement, the term "Persian Gulf States" shall
mean Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
(c) Any notice of termination pursuant to this Section 11
shall be by telephone, telex, or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to Section
9 hereof, the Company shall not then be under any liability to any Underwriter
except as provided in Sections 6 and 8 hereof; but, if for any other reason, any
Shares are not delivered by or on behalf of the Company as provided herein, the
Company will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery
34
<PAGE>
of the Shares not so delivered, but the Company shall then be under no further
liability to any Underwriter in respect of the Shares not so delivered except as
provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you.
All statements, requests, notices and agreements hereunder shall be
in writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to you as the Representatives at 245 Park Avenue, New
York, New York 10167, Attention: Registration Department; and if to the Company
shall be delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Each of the parties hereto irrevocably (a) agrees that any legal
suit, action or proceeding arising out of or based upon this Agreement or the
transactions contemplated hereby may be instituted in any New York court, (b)
waives, to the fullest extent it may effectively do so, any objection that it
may now or hereafter have to the laying of venue of any such proceeding and (c)
submits to the exclusive jurisdiction of such courts in any such suit, action or
proceeding. The Company has appointed CT Corporation, New York, New York, as its
authorized agent (the "Authorized Agent") upon whom process may be served in any
such action arising out of or based on this Agreement or the transactions
contemplated hereby that may be instituted in any New York Court by any
Underwriter or by any person who controls any Underwriter, expressly consents to
the jurisdiction of any such court in respect of any such action, and waives any
other requirements of or objections to personal jurisdiction with respect
thereto. Such appointment shall be irrevocable. The Company represents and
warrants that the Authorized Agent has agreed to act as such agent for service
at process and agrees to take any and all action, including the filing of any
and all documents and instruments, that may be necessary to continue such
appointment in full force and effect as aforesaid. Service of process upon the
Authorized Agent and written notice of such service to the Company shall be
deemed, in every respect, effective service of process upon the Company by such
party.
35
<PAGE>
15. In respect of any judgment or order given or made for any amount
due hereunder that is expressed and paid in a currency (the "judgment currency")
other than United States dollars, the Company will indemnify each Underwriter
against any loss incurred by such Underwriter as a result of any variation as
between (a) the rate of exchange at which the United States dollar amount is
converted into the judgment currency for the purpose of such judgment or order
and (b) the rate of exchange at which an Underwriter is able to purchase United
States dollars with the amount of the judgment currency actually received by
such Underwriter. The foregoing indemnity shall constitute a separate and
independent obligation of the Company and shall continue in full force and
effect notwithstanding any such judgment or order as aforesaid. The term "rate
of exchange" shall include any premiums and costs of exchange payable in
connection with the purchase of or conversion into United States dollars.
16. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
17. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
18. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
36
<PAGE>
If the foregoing is in accordance with your understanding, please
sign and return to us one of the counterparts hereof for each of the Company and
for the Representatives plus one for each counsel and upon the acceptance hereof
by you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters and
the Company. It is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
Statia Terminals Group N.V.
By: __________________________________
Name: ___________________________
Title: __________________________
Accepted as of the date hereof:
Bear, Stearns & Co. Inc.
Morgan Stanley & Co. Incorporated
Prudential Securities Incorporated
Dain Rauscher Wessels,
a division of Dain Rauscher Incorporated
By: ______________________________________________
(Bear, Stearns & Co. Inc.)
37
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be Purchased if
Total Number of Firm Maximum Option
Underwriter Shares to be Purchased Exercised
- --------------------------------------------------------------------- ---------------------- -------------------------
<S> <C> <C>
Bear, Stearns & Co. Inc..............................................
Morgan Stanley & Co. Incorporated ...................................
Prudential Securities Incorporated...................................
Dain Rauscher Wessels,
a division of Dain Rauscher Incorporated ..........................
Total......................................................
</TABLE>
38
<PAGE>
SCHEDULE II
[Names of Shareholders subject to the lock-up provision.]
39
<PAGE>
TEXT OF THE PROPOSED AMENDMENT IN FULL
TO THE ARTICLES OF INCORPORATION
OF STATIA TERMINALS GROUP N.V.
Smeets Thesseling van Bokhorst Spigt
draft dated April 20, 1999
<PAGE>
ARTICLES OF INCORPORATION
OF
STATIA TERMINALS GROUP N.V.
NAME, SEAT AND DURATION
ARTICLE 1
1.1 Name. The name of the company is: Statia Terminals Group N.V.
1.2 Statutory seat, branches and branch offices. The company has its
statutory seat at Curacao, Netherlands Antilles. The company may have
one or more branches and/or branch offices outside of Curacao,
Netherlands Antilles.
1.3 Transfer of statutory seat. The company may transfer its statutory
seat to another country and assume the status of a legal entity
formed under the laws of that country in accordance with the
Netherlands Antilles Ordinance on transfer of seat to third
countries, pursuant to a resolution to that effect adopted by the
Board of Directors (as defined in of article 10.1 hereof), but only
if it deems such transfer of seat in the best interests of the
company.
1.4 Duration. The company has been constituted for an indefinite period of
time.
OBJECTS
ARTICLE 2
2.1 Objects. The objects of the company are to incorporate, participate
in, hold, manage, operate and finance entities, legal or otherwise,
directly or indirectly, belonging to the Statia group of companies
engaged in the business of marine terminaling in St. Eustatius, and
Point Tupper, Nova Scotia, Canada, as well as (a) to participate in
any other venture or company, (b) to invest its assets in securities,
including shares and other certificates of participation and bonds,
as well as other claims for interest bearing debts however
denominated, and (c) to guarantee or otherwise secure, and to
transfer in ownership, to mortgage, pledge or otherwise to encumber
assets as security for the obligations of the company and for the
obligations of third parties, with or without consideration.
2.2 Related activities. The company is entitled to do all that may be
useful or necessary for the attainment of its objects or that is
connected therewith in the widest sense.
CAPITAL AND SHARES
ARTICLE 3
3.1 Authorized capital (amount). The authorized capital of the company
amounts to Three Hundred Thousand United States Dollars (US
$300,000.00).
<PAGE>
2
3.2 Authorized capital (shares). The authorized capital consists of
thirty million (30,000,000) shares, each with a par value of One
United States Cent (US $0.01), and is divided into twenty million
(20,000,000) class A common shares (the "class A shares" or the
"common shares"), seven million eight hundred thousand (7,800,000)
class B subordinated shares (the "class B shares" or the
"subordinated shares"), and two million two hundred thousand
(2,200,000) class C shares (the "class C shares" or the "incentive
shares"). The class A shares shall be numbered A1 through
A20.000.000, the class B shares shall be numbered B1 through
B7.800.000, and the class C shares shall be numbered C1 through
C2.200.000. The class A shares and the class B shares have full
voting rights, whilst the class C shares shall be non-voting. At the
date of this amendment (the "Initial Issue Date"), at least twenty
percent of the authorized capital is issued and outstanding in the
form of voting shares with third parties, consisting of at least
7,600,000 common shares issued in connection with the initial public
offering of such shares at the Initial Issue Date and 3,800,000
subordinated shares.
3.3 Definitions of "shares", "shareholders". In these articles of
incorporation, unless specifically stated otherwise herein, the term
"shares" means class A shares, class B shares and class C shares, and
the term "shareholders" means holders of shares of class A shares,
class B shares and class C shares.
3.4 Repurchase of shares. The company is entitled to repurchase fully
paid up shares in its own capital for valuable consideration,
provided that at all times at least twenty percent of the authorized
capital of the company in the form of voting shares remains
outstanding with third parties.
3.5 Treatment of treasury shares. The company may not derive any rights
from its treasury shares. For the purpose of determining its issued
and outstanding capital, such shares shall not be included as part of
such capital.
3.6 Cancellation of shares. The Board of Directors may, without
instruction or authorization of the General Meeting (as defined in
article 13.1 hereof), cancel shares which are in the possession of
the company.
FORM OF SHARES; ISSUANCE OF SHARES
ARTICLE 4
4.1 Registered form. The shares shall be issued in registered form only.
4.2 Consideration; fractional shares. Shares shall be issued at or above
par. Fractional shares may be issued. Payments on shares may be made
in cash and/or in kind, and in such currency as the Board of
Directors deems fit.
4.3 Terms and conditions of issuance. Subject to the terms of these
articles of incorporation, shares may be issued at such times, for
such considerations and on such terms as may be
<PAGE>
3
established from time to time by the Board of Directors in its sole
discretion without the approval of the shareholders, except as set
forth in the next sentence. During the Subordination Period (as
defined in article 5) with respect to the subordinated shares, the
Board of Directors may not issue (i) more than 4,000,000 common
shares, in addition to the common shares issued on the Initial Issue
Date, excluding any common shares issued upon any exercise of the
overallotment option by one or more underwriters of the common
shares, or (ii) any equity securities ranking senior to the common
shares on distribution of dividends (as set out in article 17) or on
any distribution upon dissolution and liquidation of the company (as
set forth in article 18), without the approval of the holders of a
majority of the outstanding common shares, not including those common
shares held by the holder(s) of incentive shares and their
affiliates, if any. For purposes of the foregoing, an "affiliate"
shall mean a holder of shares of the company that is (i) directly, or
indirectly, through one or more intermediaries controlled by or under
control or "common control" (as such terms are further described in
the United States Securities Exchange Act of 1934) with, the company
including but not limited to, any holder of the subordinated shares
and/or incentive shares at the Initial Issue Date, or (ii) an officer
or director of the company or of an affiliate of the company.
4.4 Exception to restriction on issuance. The restriction set forth in
article 4.3 on issuance of additional common shares shall, however,
not apply to the following issuances: (a) upon exercise of the
over-allotment option by any underwriter of common shares, (b) upon
conversion of any subordinated shares, (c) pursuant to one or more
employee benefit plans of the company, (d) in the event of a
combination or subdivision of any common shares, or (e) in connection
with an acquisition or capital improvement by or of the company that
would have resulted in an increase in Adjusted Operating Surplus (as
defined in article 17) on a per common share and subordinated share,
pro forma basis for the preceding four-quarter period (or within 365
days of the closing of such an acquisition or the completion of such
a capital improvement and the net proceeds from such issuance are
used to repay debt, if any, incurred in connection therewith).
4.5 Company may not subscribe for shares. When issuing shares, the
company shall not be entitled to subscribe for its own shares.
4.6 Pre-emption. No shareholder shall have any right of pre-emption in
connection with any issuance of shares in the capital of the company
or other equity securities that may be issued by the company.
CLASS B CONVERSION
ARTICLE 5
5.1 Class B shares conversion - general. If, at any time during or after
the Subordination Period (as defined below), any subordinated shares
are outstanding, all of such subordinated shares will convert into
common shares in the manner set forth in this article: (i) if the
tests for ending subordination (as set out below) have been met for
any quarter ending on or after
<PAGE>
4
June 30, 2002, one quarter of the aggregate number of subordinated
shares outstanding on the Initial Issue Date (being 950,000
subordinated shares) will convert into common shares and (ii) if the
tests for ending subordination have been met for any quarter ending
on or after June 30, 2003, an additional quarter of the aggregate
number of subordinated shares outstanding on the Initial Issue Date
(being 950,000 subordinated shares) will convert into common shares,
provided that such conversion of the second one-quarter of the
subordinated shares may not occur until at least one calendar year
following the conversion of the first one-quarter of the subordinated
shares as described above. The Board of Directors shall for the
purpose of such conversion be authorized in its sole discretion to
take any and all necessary steps in connection therewith, including,
without limitation, the determination of the applicable shares,
numbered from B1 onwards representing a quarter of all outstanding
subordinated shares, at each time of a conversion. For the purpose
hereof, the "Subordination Period" shall mean the period from the
Initial Issue Date until the tests set forth below in (a) through
(c), inclusive, have been met for any quarter ending on or after June
30, 2004 for which:
(a) distributions (in the form of dividends or otherwise) of
Available Cash from Operating Surplus (as such terms are
defined in article 17) on the common and subordinated shares
with respect to each of the three consecutive non-overlapping
four-quarter periods immediately preceding the date of
determination that equaled or exceeded the sum of the Target
Quarterly Distribution (as defined in article 17) on all of
the outstanding common and subordinated shares during such
periods;
(b) the Adjusted Operating Surplus generated by the company
during each of the three consecutive non-overlapping
four-quarter periods immediately preceding the date of
determination equaled or exceeded the sum of the Target
Quarterly Distribution on all of the common and subordinated
shares that were outstanding on a fully diluted basis (i.e.
after assuming the exercise of all warrants, vested stock
options and conversion of subordinated shares) during those
periods; and
(c) there are no outstanding Common Share Arrearages (as defined
in article 17).
For purpose of the determination of any conversion as set out above
for any quarter (as further described above), the tests for ending
subordination shall be met for any quarter for which:
(d) distributions (in the form of dividends or otherwise) of
Available Cash from Operating Surplus on the common and
subordinated shares with respect to each of the three
consecutive non-overlapping four-quarter periods immediately
preceding the date of determination equaled or exceeded the
sum of the Target Quarterly Distribution on all the
outstanding common and subordinated shares during such
periods;
(e) the Adjusted Operating Surplus generated by the company
during each of the three
<PAGE>
5
consecutive non-overlapping four-quarter periods immediately
preceding the date of determination equaled or exceeded the
sum of the Target Quarterly Distribution on all of the common
and subordinated shares that were outstanding on a fully
diluted basis during those periods; and
(f) there are no outstanding Common Share Arrearages.
5.2 Conversion of subordinated shares on expiration of the Subordination
Period. Upon the expiration of the Subordination Period all
outstanding subordinated shares will convert into common shares.
Subject to paragraph 1 of this article, in each conversion, the
relevant subordinated shares outstanding will convert on a
one-for-one basis, into common shares, and will thereafter
participate, among other things, pro rata with the other common
shares then outstanding in distributions (in the form of dividends or
otherwise) of Available Cash with due observance of the dividend and
other distribution rights of the holders of incentive shares (as
described in article 17) in Available Cash.
5.3 Effect of surrender and conversion. Upon conversion of the
appropriate number of subordinated shares in accordance with the
foregoing provisions, the Board of Directors may upon request, issue
one or more share certificates representing the common shares upon
conversion of the subordinated shares, all in accordance with the
provisions of article 6 of these articles of incorporation. All
rights relating to the subordinated shares converted into common
shares shall cease and such subordinated shares shall no longer be
outstanding.
SHARE CERTIFICATES FOR SHARES
ARTICLE 6
6.1 Share certificates. Share certificates may be issued for shares.
6.2 Number of shares represented by certificates. Share certificates may
be issued to represent more than one share, or, in the event of the
issuance of a (temporary) global share certificate representing all
common shares issued and outstanding at the Initial Issue Date. If
shares held by a shareholder are represented by one share
certificate, and if such shareholder disposes of part of his or her
shares, such shareholder shall be entitled to request the issuance of
a share certificate representing such shareholder's remaining shares.
6.3 Form and manner of issuance. Share certificates, if any, which shall
include duplicates of share certificates as referred to in article 7
hereof, shall be issued and signed on behalf of the company by or on
behalf of the Board of Directors or by one or more persons or
entities appointed as transfer agent and/or registrar. All costs and
expenses of the company associated with the issuance of share
certificates (including any duplicates) at the request of a
shareholder, may be charged to such requesting shareholder, unless
provided otherwise in these articles of incorporation. Share
certificates shall bear such legend or legends as the Board of
Directors deems fit and appropriate in connection with the issuance
of shares or
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6
restrictions on transfer of shares. The reverse side of any
certificates issued shall contain a printed form of an instrument of
transfer that can be used by the holders of the shares represented by
such certificates to transfer such shares, or a portion thereof, to a
transferee, which may include the company in accordance with the
provisions of these articles of incorporation.
LOST AND MUTILATED CERTIFICATES
ARTICLE 7
Lost and mutilated share certificates. If any shareholder can prove
to the satisfaction of the Board of Directors or any transfer agent
or registrar of the company, that any share certificate has been
mutilated, mislaid or destroyed, then, at such shareholder's written
request, a duplicate may be issued by the Board of Directors or any
transfer agent or registrar of the company on such terms and
conditions as the Board of Directors may deem fit. Upon the issuance
of the duplicate share certificate (on which it shall be noted that
such certificate is a duplicate), the original share certificate
shall be null and void vis-a-vis the company. A mutilated share
certificate may be exchanged for a duplicate certificate upon
delivery of the mutilated certificate to the Board of Directors or
any transfer agent or registrar of the company.
SHAREHOLDERS REGISTER; TRANSFER OF SHARES; NOTICES
ARTICLE 8
8.1 Shareholders register. The Board of Directors, or registrar or
transfer agent designated pursuant to article 8.5, shall keep a
shareholders register (the "Register") in which the names and
addresses of all shareholders shall be registered, along with the
shares issued to, and the payment thereon by, the shareholders. The
Board of Directors shall regularly maintain the Register, including
the registration in the Register of any issue, transfer and
cancellation of shares.
8.2 Registration of other persons. The Board of Directors shall also
register in the Register the names and addresses of those persons who
have a right of usufruct (vruchtgebruik) or pledge (pand) on the
shares.
8.3 Addresses to be furnished, etc. Each shareholder, and holder of a
right of usufruct or pledge on shares is required to provide his or
her address to the company. The company shall be entitled for all
purposes to rely on the name and address of the aforementioned
persons as entered in the Register. Such person may at any time
change his or her address as entered in the Register by means of a
written notification to the company at its principal office, or any
transfer agent or registrar of the company.
8.4 Access to register. At the request of a shareholder, or a holder of a
right of usufruct or pledge on shares, the Board of Directors shall
furnish an extract of the Register, free of charge, insofar as it
relates to such person's interest in a share.
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7
8.5 Location of register. The Register shall be kept by the Board of
Directors at the company's principal office, or by a registrar or
transfer agent designated thereto by the Board of Directors at such
other location as it may deem fit. In case the Register is kept at
any location other than the company's principal office, then the
registrar or transfer agent shall be obligated to send to the
principal office of the company a copy thereof from time to time. In
case a registrar or transfer agent is appointed by the Board of
Directors, then such registrar or transfer agent shall be authorized
and, as the case may be, obligated to exercise the rights and fulfill
the obligations set out in this article with respect to the Register.
8.6 Transfer of shares--general. With due observance of the provisions of
article 9 hereof, the transfer of shares, including any limited
rights thereon, shall be effected (i) by serving upon the company in
the manner prescribed by law, an instrument of transfer, or (ii) by
written acknowledgment by the company of the transfer, which
acknowledgment shall be signed on behalf of the company by or on
behalf of the Board of Directors or by the registrar or transfer
agent of the company. In case a share certificate is outstanding, the
written acknowledgment by the company of the transfer of a share,
including any limited rights thereon, can only be made by an
endorsement of the transfer on such share certificate. In that case,
the transferor or transferee of a share shall present such share
certificate to the company, or its registrar or transfer agent, for
acknowledgment of the transfer on behalf of the company to be made
thereon. In case no share certificate has been issued, the
registration of the transfer of a share in the Register shall have
the effect of a written acknowledgment by the company of such
transfer of a share. This paragraph shall also apply in the case of
an allocation of shares resulting from a division and partition of
any community property.
8.7 Certain repurchase procedures. With due observance of article 3.4
hereof, in case of any repurchase of shares by the company, the
holder shall surrender each certificate or certificates representing
such shares, if any, to the company in the manner and at a place
designated therefor by the company, with the reverse side of the
certificate or certificates duly executed for the purpose of the
transfer of such shares to the company. Such manner shall include
personal delivery, registered mail or overnight delivery service of
recognized standing.
8.8 Effect of surrender and repurchase. Upon surrender of the shares for
repurchase by the company, each surrendered certificate shall be
canceled, all rights of the holders of such shares as such shall
cease with respect to such shares, and such shares shall no longer be
deemed to be outstanding for any purpose whatsoever.
8.9 Transfer of shares--assignment of voting rights of common shares. If
a common share is encumbered with a right of usufruct or pledge, then
the voting right of such common share, can not be assigned to the
holder of the right of usufruct or pledge.
PROHIBITED OWNERSHIP/RESTRICTION ON TRANSFER
<PAGE>
8
ARTICLE 9
9.1 Prohibition on percentage of ownership - general. Primarily to
prevent the company from becoming, or minimize the duration of its
classification as, a "controlled foreign corporation" or "CFC" (as
defined below) and also to prevent any ownership or transfer of the
common shares which may result in such a classification, the
ownership by a holder of common shares, directly, indirectly,
actually or constructively (within the meaning of section 958 of the
United States Internal Revenue Code of 1986, as amended (the
"Code")), of more than 9.9% of all of the common and subordinated
shares issued and outstanding (the "Ownership Limit") is prohibited,
except as otherwise provided in this article 9 below. For the purpose
of the foregoing Ownership Limit, ownership of common shares and/or
subordinated shares shall be understood to include the holding of
voting rights or voting power relating to such shares by law,
agreement or otherwise, in whatever form.
9.2 Restriction on transfer. In order to further the purposes set forth
in article 9.1, any sale, transfer, or other disposition of any
common shares by a holder of common shares (a "Sale") or any other
event relating to any common shares held by such a holder that would
result in a Violation of the Ownership Limit (as defined below) is
null and void to the extent it causes a Violation of the Ownership
Limit. The restriction in the preceding sentence shall not apply to
and the definition of the term "Sale" does not include (i) the
conversion of subordinated shares into common shares, (ii) any
subsequent transfer of the common shares resulting from such
conversion, (iii) any pledge, encumbrance, transfer by operation of
law, gift, inheritance or marital law of any interest in or right to
any common shares, as well as any sale, transfer, or other
disposition (other than a Sale) of any beneficial, as opposed to
legal (registered) interest in or right to any common shares, or (iv)
acquisition of any common shares pursuant to the exercise of
compensatory stock options or to an employee benefit plan of the
company or its subsidiaries or affiliates or any subsequent transfer
of any such common shares.
9.3 Definition CFC - ownership limit. For purposes of this article, a
non-United States corporation will be classified as a "controlled
foreign corporation" or "CFC" for United States federal income tax
purposes in any taxable year of such corporation in which more than
50% of either (i) the total combined voting power of all of its
classes of stock entitled to vote or (ii) the total value of its
stock is owned or considered owned (after applying certain
attribution rules), on any day during a taxable year, by United
States persons (as such term is defined in Section 7701 (a) (30) of
the Code) who own or are considered to own 10% or more of the total
combined voting power of all of its classes of stock entitled to
vote. For purposes of this article, a "Violation of the Ownership
Limit" occurs when (1) any person would own or would be considered to
own by virtue of the attribution provisions of section 958 of the Code
and the United States Treasury Regulations issued thereunder, or (2)
any person together with its "affiliates" and "associates" (as defined
in Rule 12b-2 under the United States Securities Exchange Act of 1934)
and any group (within the meaning of Section 13(d)(3) of such
Securities Exchange Act) of which such person is a part would own
<PAGE>
9
or would be considered to own by virtue of the beneficial ownership
provisions of Rule 13d-3 under such Securities Exchange Act, in either
case more than the Ownership Limit.
9.4 Prohibition on ownership and/or transfers other than by Sale. With
due observance of the provisions of foregoing paragraphs of this
article, including the restrictions contained therein, any pledge,
encumbrance, transfer by operation of law, gift, inheritance or
marital law of any legal (registered) or beneficial interest in or
right to any common shares, as well as any sale, transfer, or other
disposition (other than a Sale) of any beneficial, as opposed to any
interest in or right to any common shares (other than the conversion
of subordinated shares into common shares, any subsequent transfer of
the common shares resulting from such conversion or the acquisition
of any common shares pursuant to the exercise of compensatory stock
options or to an employee benefit plan of the company or its
subsidiaries or affiliates or any subsequent transfer of any such
common shares) (a "Gift") that would result in a Violation of the
Ownership Limit is prohibited to the extent that such Gift causes a
Violation of the Ownership Limit.
9.5 Waiver/declaration of non-applicability. The restrictions on transfer
and ownership described in this article may be waived, or declared
not applicable, and an exemption may be granted from time to time by
the Board of Directors, in its sole discretion, provided the same is
irrevocable with respect to a Transfer (as defined in article 9.6
below) or any other event described in this article relating to
ownership by a holder of common shares above the Ownership Limit. The
Board of Directors may, in its sole discretion set the terms and
conditions for the issuance of such waiver, declaration of
non-applicability and/or exemption.
9.6 Restrictive measures for benefit of the company. In order for the
company to determine, or verify compliance with the restrictions set
out above in this article, the following shall apply: (a) any person
who acquires or attempts or intends to acquire ownership (direct,
indirect, actual or constructive ownership within the meaning of
section 958 of the Code) of common shares that will or may violate
the foregoing restrictions on transferability and ownership is
required to give notice immediately to the company thereof and to
provide the company and the Board of Directors with such other
reasonable information as it may request in order to determine the
effect of a Sale, Gift (a Sale and/or a Gift to be referred to as a
"Transfer") or event on the classification of the company as a CFC or
for any other related purpose, (b) the company shall not recognize a
person in the capacity as shareholder of common shares until its
common shares have been issued in the name of such person (or in the
case of a Transfer, until the common shares so transferred have been
registered by or on behalf of the Board of Directors in the name of
such transferee in the register); until such recognition by or on
behalf of the company in the manner as aforementioned, the voting
rights, dividend rights and/or other distribution rights relating to
such shares shall be suspended and may not be exercised by the
purported holder thereof, (c) upon the occurrence of a Gift resulting
in a Violation of the Ownership Limit, the acquiror or transferee
shall be required to dispose of the number of common shares that
exceeds the Ownership Limit (the "Excess Common Shares") to a person
whose ownership of any such
<PAGE>
10
shares would not violate the Ownership Limit (a "Qualified Person")
within 15 days of the date of the prohibited Gift. The acquiror or
transferee of Excess Common Shares pursuant to a prohibited Gift (the
"Prohibited Transferee") shall be required to notify the company in
writing of its compliance with the requirement in the preceding
sentence within 5 days of any such compliance (a "Compliance
Notice"). If the Prohibited Transferee fails to provide such a
Compliance Notice to the company within 20 days of the date of the
prohibited Gift, the company shall be irrevocably and exclusively
authorized to sell and transfer on behalf of the Prohibited
Transferee the Excess Common Shares to a Qualified Person, at a price
for such shares of no less than the fair market value and to take all
necessary steps in connection therewith. In the event of a Gift, the
acquiror or transferee shall by acceptance or receipt of the relevant
share certificate(s), if any, representing any Excess Common Shares
be deemed to have agreed to the foregoing provisions set out in (c)
above.
9.7 Notices, etc. Notices and other communications provided for herein
shall be in writing, shall be delivered by hand or overnight courier
services of recognized standing or sent by telecopy, shall be deemed
given when actually received and shall be addressed as follows: if to
a shareholder's address, as shown in the Register of the company; and
if to the company, to the company's principal office or its
registered agent, attention: Secretary.
9.8 Applicability on issue of common shares or subordinated shares. For
the purpose of this article, acquisition by holders of common shares
of common shares or subordinated shares by virtue of an issue or
distribution of such shares to a holder of common shares shall be
equated to a transfer; for the purposes of determining the amount of
the issued capital, the shares to be issued or distributed shall be
included therein.
MANAGEMENT
ARTICLE 10
10.1 Board of directors--general. The management of all the affairs,
property and business of the company shall be vested in a Board of
Directors (the "Board of Directors"), who shall have and may exercise
all powers except such as are exclusively conferred upon the
shareholders by law or by these articles of incorporation, as from
time to time amended.
10.2 Board of directors--number of members/class of members. The number of
persons constituting the Board of Directors shall be not less than
three or more than fifteen, as fixed from time to time by the General
Meeting. The number of persons constituting the Board of Directors
shall, until changed at any succeeding General Meeting, be the number
so fixed. The Board of Directors shall be divided into three classes,
being class A directors (the "A director(s)"), class B directors (the
"B director(s)") and class C directors (the "C director (s)"), the
designation of which shall be determined by the General Meeting. Each
director shall be so designated by the General Meeting upon
appointment or reappointment, as the case may be, in case of a
vacancy (as defined in article 10.4).
10.3 Board of directors--term. Each director shall serve, subject to the
provisions of this article
<PAGE>
11
10.6, as director, with due observance of the following terms: the A
directors shall initially serve - as of the Initial Issue Date - for
a period of two years, and thereafter for six-year periods; the B
directors shall initially serve - as of the Initial Issue Date - for
a period of four years, and thereafter for six-year periods; and the
C directors shall serve - as of the Initial Issue Date - for six-year
periods.
10.4 Board of directors--appointment. Each director shall be appointed by
the General Meeting, with due observance of the following provisions.
In case of a vacancy, upon the expiration of a director's term or
otherwise (each, a "vacancy"), the Board of Directors shall be
authorized pursuant to a duly adopted resolution to nominate for such
vacancy a director for appointment by the General Meeting. Such Board
of Directors' resolution shall list at least two names for each such
vacancy, which may include a former director whose term has lapsed.
The resolutions to nominate directors shall be non-binding on the
General Meeting; the General Meeting is free to appoint, by a duly
adopted shareholders resolution in accordance with the provisions of
article 14.8, the directors so nominated, or reject nomination. In
case the nominated director(s) are not appointed by the General
Meeting, the Board of Directors must convene within seven days of the
date of the General Meeting, a new meeting, with due observance of
the provision of article 14 below, at which the vacancy or vacancies
shall be filled. At such subsequent General Meeting, the Board of
Directors may, again, nominate - by non-binding resolution - two
directors for each such vacancy for appointment by the General
Meeting. Notwithstanding the foregoing sentence, at such subsequent
General Meeting, the shareholders shall be free to appoint any person
or entity for each vacancy as they deem fit upon rejection of the
persons nominated by the Board of Directors. In the event the Board
of Directors wishes to exercise its right to nominate directors, it
shall in the convening of a General Meeting to appoint directors
state the persons so nominated for each such vacancy by the Board of
Directors.
10.5 Board of directors--vacancies in general. If one or more directors
are prevented from or are incapable of acting as a director, the
remaining directors may appoint one or more persons to fill such
vacancy or vacancies with the same qualifications, if any, as
determined by the General Meeting to serve until the immediately
following General Meeting.
10.6 Board of directors--removal. Directors may be removed or suspended at
any time by the General Meeting. At any General Meeting at which
action is taken to remove a director, or at any subsequent General
Meeting, any vacancy or vacancies created by such action may be
filled with due observance of article 10.2.
10.7 Board of directors--vacancies in connection with certain reductions.
If at any time the number of directors in office shall be reduced to
less than three, the remaining director(s) shall forthwith call and
convene a General Meeting for the purpose of filling the vacancies in
the Board of Directors, and in the event that all of the directors
are prevented from or are incapable of acting as directors, the
company shall be temporarily managed by any person or persons
previously appointed by the General Meeting to so act, who in turn
shall forthwith call and convene a General Meeting for the purpose of
appointing three or more directors.
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12
If no such General Meeting shall be called, or if no such person
shall have been appointed, any person or persons holding in the
aggregate at least ten percent of the issued and outstanding voting
shares may call and convene a General Meeting for the purpose of
appointing the directors.
10.8 Board of directors--meetings/notice. Meetings of the Board of
Directors shall be held regularly at such place and at such time as
the Board of Directors may from time to time determine. Special
meetings of the Board of Directors shall be held as often as any two
directors or the Chairman deems necessary, who shall be authorized to
call the same. Notice of the time and place of a meeting of the Board
of Directors shall be given:
(a) not less than ninety-six hours before such meeting, by
written notice mailed to each director, or
(b) not later than the day immediately preceding the date of
such meeting, by personal delivery, or by telephone call or
by sending a telegram or telefax or other means of written
notification to each director, receipt of which has been
confirmed.
A waiver of notice of any meeting of the Board of Directors signed by
all of the non attending directors, whether before, at, or after the
time of such meeting, shall be deemed equivalent to notice of the
meeting. If all the directors are present at the meeting, notice
shall be deemed to have been duly given.
10.9 Board of directors--quorum. A majority of the members of the Board of
Directors shall constitute a quorum. The resolution of the majority
of the directors present, in person or by proxy as hereinafter
provided, at a meeting at which a quorum is so present, shall
constitute the decision of the Board of Directors. In the absence of
a quorum, any director may adjourn any meeting from time to time
until a quorum shall be present.
10.10 Board of directors--adoption of resolutions. All resolutions to be
adopted at a meeting of the Board of Directors shall be adopted by
majority of the votes cast, provided that in the event of an equality
of votes, the vote(s) cast by the Chairman shall be decisive.
10.11 Board of directors--meetings by telephone, etc. Meetings of the Board
of Directors may be held through conference telephone calls or other
communication equipment allowing all persons participating in the
meeting to hear each other or through any other device permitted by
law, and participation in a meeting through any such lawful device or
arrangement shall constitute presence at such meeting.
10.12 Board of directors--action by written consent. When action by the
Board of Directors is required or permitted to be taken, action at a
meeting may be dispensed with if all the directors shall consent in
writing to such action taken or being taken.
10.13 Board of directors--proxies. Directors may by telegram, telefax or
other written instrument
<PAGE>
13
appoint a proxy to act on their behalf at any designated meeting or
meetings of the Board of Directors. Such proxy can only be another
director of the company.
10.14 Committees of the Board of Directors. The Board of Directors shall
have the power and authority to create and disband committees of the
Board of Directors, and each such committee shall have the authority
and power as may from time to time be delegated to it by the Board of
Directors and shall operate under the ultimate responsibility of the
Board of Directors.
OFFICERS AND REPRESENTATIVES
ARTICLE 11
11.1 Chairman and other officers and agents. The Board of Directors may
designate a Chairman (the "Chairman") from among the directors. The
Board of Directors may further from time to time elect a president,
one or more vice-presidents (including executive or senior
vice-presidents), a controller, one or more assistant controllers, a
treasurer, one or more assistant treasurers, a secretary, one or more
assistant secretaries and any such other officers and agents as it
determines proper, all of whom shall hold office at the pleasure of
the Board of Directors. The same person may hold any two or more of
the aforesaid offices but no officer shall execute, acknowledge or
verify an instrument in more than one capacity if such instrument is
required by law or by these articles of incorporation to be executed,
acknowledged or verified by two or more officers. The Chairman must
be a director, but the other officers of the company need not be
members of the Board of Directors.
11.2 Representation of the company. The company shall be represented at
law and otherwise, and shall be bound with respect to third parties,
by (i) any two directors acting jointly, (ii) any director together
with any of the following persons listed in (i) through (vi) below,
acting jointly, or (iii) any two of the following persons acting
jointly, provided such persons are authorized by the Board of
Directors to represent the company with the following titles:
(i) Chairman;
(ii) president;
(iii) vice-presidents (including any executive vice-presidents or
senior vice-presidents);
(iv) treasurer or assistant treasurer;
(v) officer;
(vi) secretary or assistant secretary;
(vi) controller or assistant controller.
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14
The Board of Directors may also from time to time authorize other
persons, who may or may not be directors, to represent the company,
who shall have such other titles as the Board of Directors may
determine, provided that at all times any two of such persons can
only represent the company acting jointly.
11.3 Additional power and authority of representatives. The persons
holding the above mentioned titles which the Board of Directors may
from time to time authorize as herein provided, shall have such power
and authority as the Board of Directors may from time to time grant
each of them respectively.
11.4 Additional rules and regulations. The Board of Directors may adopt
and may amend and repeal such rules, regulations and resolutions as
it may deem appropriate for the conduct of the affairs and the
management of the company, including rules, regulations and
resolutions setting forth the specific powers and duties of the
holders of the above-mentioned titles (not being directors of the
company), other persons and committees of the Board of Directors
authorized by the Board of Directors to represent the company. Such
rules, regulations and resolutions must be consistent with these
articles of incorporation. Any restrictions of the powers of
representation of the holders of the above-mentioned titles (other
than any director) will take effect on the day after the resolutions,
rules or regulations containing such restrictions have been filed at
the Commercial Register of the Chamber of Commerce and Industry in
Curacao, and such other places in the Netherlands Antilles where the
company conducts its business.
11.5 Compensation of representatives. The directors, the holders of the
above-mentioned titles and any other persons authorized by the Board
of Directors to represent the company shall receive such compensation
as the General Meeting (in the case of the directors) may from time
to time determine or approve and the Board of Directors (in the case
of all other persons not being directors) may from time to time
determine.
INDEMNIFICATION, ADVANCEMENT OF EXPENSES AND INSURANCE
ARTICLE 12
12.1 Indemnification not in connection with actions by or in right of the
company. The company shall have the power to indemnify, and shall
indemnify to the fullest extent permitted by applicable law, any
person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than
an action by or in the right of the company) by reason of the fact
that such person is or was a director, officer, employee or agent of
the company, or is or was serving at the request of the company as a
director, officer, employee or agent of another company, partnership,
joint venture, trust or other enterprise or entity, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he acted in good
faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the company and with respect to any
criminal
<PAGE>
15
action or proceeding, had no reasonable cause to believe that its
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which was reasonably believed to be in or not opposed to the best
interests of the company.
12.2 Indemnification in connection with actions by or in right of the
company. The company shall have the power to indemnify, and shall
indemnify to the fullest extent permitted by applicable law, any
person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the
right of the company to procure a judgment in its favor by reason of
the fact that such person is or was a director, officer, employee or
agent of the company or is or was serving at the request of the
company as a director, officer, employee or agent of another company,
partnership, joint venture, trust or other enterprise or entity,
against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such
person in connection with the defense or settlement of such action or
suit if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the company
and except that no indemnification shall be made in respect of any
claim, issue or matters as to which such person shall have been
finally adjudged to be liable to the company for improper conduct
unless and only to the extent that the court in which such action or
suit was brought or any other court having appropriate jurisdiction
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such
expenses, judgments, fines and amounts paid in settlement which the
court in which the action or suit was brought or such other court
having appropriate jurisdiction shall deem proper.
12.3 Related expenses. To the extent that a director, officer, employee or
agent of the company has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in article
12.1 and 12.2, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection therewith.
12.4 Certain limitations on indemnification. Any indemnification under
article 12.1 and 12.2 (unless ordered by a court) shall be made by
the company only as authorized by contract approved, or resolution or
other action adopted or taken, by the Board of Directors or by the
shareholders.
12.5 Advancement of expenses. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the company in
advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of the applicable
director, officer, employee or agent to repay such amount if it shall
ultimately be determined that such person is not entitled to be
indemnified by the company as authorized by this article 12.
12.6 Indemnification and advancement of expenses not exclusive. The
indemnification and
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16
advancement of expenses provided by or granted pursuant to the other
paragraphs of this article 12 shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of
expenses may be entitled under any law, agreement, vote of
shareholders or disinterested directors, or otherwise, both as to
action in its official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such a
person.
12.7 Insurance. The company shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the company or is or was serving at the request
of the company as a director, officer, employee or agent of another
company, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him
or her in any such capacity, or arising out of his or her status as
such, whether or not the company would have the power to indemnify
him or her against such liability under the provisions of this
article 12.
GENERAL MEETINGS OF SHAREHOLDERS
ARTICLE 13
13.1 General. All general meetings of shareholders (each, a "General
Meeting") shall be held on any one of the Islands of the Netherlands
Antilles.
13.2 Timing. The annual General Meeting shall be held as early as
reasonably practicable, and in any event not later than the first day
of June, after the close of the company's preceding financial year.
13.3 Actions to be taken. At the annual General Meeting:
a. the Board of Directors shall render a report on the
business of the company and the conduct of its affairs
during the preceding financial year;
b. the balance sheet and the profit and loss account shall be
determined, set and adopted after having been submitted
together with an explanatory statement (together, the
"annual accounts"), stating by which standards the movable
and immovable property of the company have been appraised;
c. the person or persons referred to in paragraph 5 of article
10 hereof shall be appointed;
d. the appropriation of profits shall be made; and
e. such other proposals included in the agenda specified in the
notice of the meeting shall be dealt with.
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17
GENERAL MEETINGS--PLACE, CONVOCATION AND VOTING
ARTICLE 14
14.1 Timing of other General Meetings. Other than the annual General
Meeting, all General Meetings shall be held as often as the Board of
Directors shall deem necessary.
14.2 Convening by Board of Directors. With due observance of article 14.3,
all General Meetings shall be exclusively convened by the Board of
Directors.
14.3 Request by shareholders to convene. Shareholders representing in the
aggregate at least one tenth of the outstanding capital of the
company may request the Board of Directors to convene a General
Meeting, stating the subjects to be discussed. If the Board of
Directors has not convened a meeting within four weeks after the
request, the person(s) who requested the convening of the meeting
shall be authorized to petition the competent courts of the
Netherlands Antilles for authorization to convene such meeting, but
only in accordance with, and subject to, the provisions of Article 82
of the Commercial Code of the Netherlands Antilles. A copy of the
notice to convene such meeting shall be sent to the company at its
principal office, and shall be given to the Board of Directors.
14.4 Method of convocation and notification. All convocations of General
Meetings and all notifications to shareholders shall be made by
letter mailed to the addresses of shareholders appearing in the
Register.
14.5 Timing of convocation -record date. The convocation shall take place
no later than ten days prior to the date of the meeting, excluding
the date of the sending of the notice and the date of the meeting.
The Board of Directors may set a record date for any General Meeting
which shall be no less than seven days and no more than sixty days
prior to the date of the meeting, to verify the eligibility of
shareholders to vote, as well as to verify the ownership level of any
shareholders under the provisions of article 9 of these articles of
incorporation.
14.6 Agenda. The agenda for the meeting shall be specified in the
convocation of the meeting or it shall be stated that the
shareholders may take cognizance thereof at the principal office of
the company.
14.7 Person presiding. General meetings shall be presided over by the
Chairman or any other director, or, in their absence at such meeting,
by a person designated thereto by the meeting.
14.8 Majority votes - quorum. All resolutions of General Meetings shall be
taken by an absolute majority of votes, for which meeting a quorum
exists of at least one-third of the aggregate outstanding voting
shares in the capital of the company present or represented thereat,
except where otherwise provided in these articles of incorporation.
14.9 Proxies. Shareholders may be represented at the meeting by a proxy
authorized in writing, which shall include any message transmitted by
telegram or telefax or other means of written
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18
communication.
14.10 Vote per share. At a General Meeting, one vote may be cast for each
class A share and one vote may be cast for each class B share.
Holders of class C shares shall not be entitled to vote, other than
in the case of, and subject to the provisions of, Article 93a of the
Commercial Code of the Netherlands Antilles, in which case one vote
may be cast for each class C share.
14.11 Interested votes; abstentions and invalidly cast votes. Valid votes
may also be cast for the shares of those who, other than as
shareholders of the company, would acquire any right or be discharged
from any obligation towards the company by the resolution to be
adopted. Abstentions and invalidly cast votes shall not be counted as
votes at a General Meeting.
14.12 Validity of certain resolutions as a result of unanimous actions.
Provided and as long as the entire issued share capital is
represented at any General Meeting, valid resolutions may be adopted,
even when the provisions of these articles of incorporation with
respect to convocation and specification of the agenda have not or
have only partially been observed, provided that such resolutions are
unanimously adopted.
14.13 Participations of directors. Each director shall in his or her
capacity be entitled to attend, address and advise the General
Meeting.
FINANCIAL YEAR
ARTICLE 15
Term of financial year. The financial year of the company shall run
from the first day of January of each year up to and including the
last day of December of such year.
ANNUAL ACCOUNTS; BOOKS AND RECORDS
ARTICLE 16
16.1 Annual accounts--timing and manner of submission. Within five (5)
months after the close of the company's financial year, the annual
accounts shall be submitted to the shareholders by the Board of
Directors. Each director shall sign the annual accounts; if the
signature of any director is lacking, then this shall be stated
therein together with the reason thereof.
16.2 Maintenance of books and records and annual accounts. The company
shall maintain its books and records, as well as the annual accounts
by which the profit is determined, on the basis of generally accepted
accounting principles in effect in the United States of America ("US
GAAP").
16.3 Annual accounts--adoption by annual General Meeting. The annual
accounts shall be adopted by the annual General Meeting.
<PAGE>
19
DEFINITIONS/ GENERAL PROVISION ON PROFIT AND RESERVES;
PAYMENT OF MINIMUM QUARTERLY DISTRIBUTION
AND OTHER AMOUNTS TO SHAREHOLDERS
ARTICLE 17
17.1 Definitions. For the purpose of the payment by the company of
distributions on its shares by dividend or otherwise, the following
definitions are used. For purposes of this article 17, for accounting
purposes and otherwise, the term "company" shall be deemed to include
Statia Terminals Group N.V. and its subsidiaries on a consolidated
basis in accordance with U.S. GAAP.
(i) Acquisition: Acquisition manes any transaction in which the
company acquires (through an asset acquisition, merger, stock
acquisition or other form of investment) control over all or a
portion of the assets, properties or business of another person for
the purpose of increasing the operating capacity or revenues of the
company over the operating capacity or revenues of the company
existing immediately prior to such transaction.
(ii) Adjusted Operating Surplus: For any period, Adjusted Operating
Surplus means:
(1) the Operating Surplus generated during that period,
as adjusted to:
(a) decrease Operating Surplus by:
(1) any net increase in Working Capital Borrowings during that
period, and
(2) any net reduction in cash reserves for Operating
Expenditures during that period not relating to an Operating
Expenditure made during that period; and
(b) increase Operating Surplus by:
(1) any net decrease in Working Capital Borrowings during that
period, and
(2) any net increase in cash reserves for Operating Expenditures
during that period required by any debt instrument for the
repayment of principal, interest or premium.
Adjusted Operating Surplus does not include that portion of Operating
Surplus included in clause (a) (1) of the definition of Operating
Surplus.
(iii) Available Cash: For any calendar quarter prior to the
dissolution and liquidation of the company, Available Cash means:
(a) the sum of:
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20
(1) all of the company's cash and cash equivalents
on hand at the end of that quarter, and
(2) all of the company's additional cash and cash
equivalents on hand on the date of determination
of Available Cash for that quarter resulting from
Working Capital Borrowings made after the end of
that quarter;
less
(b) the amount of any cash reserves necessary or appropriate in
the reasonable discretion of the Board of Directors to:
(1) provide for the proper conduct of the company's
business, including reserves for future capital
expenditures and for the company's anticipated
future credit needs, after that quarter,
(2) provide funds for Target Quarterly
Distributions and cumulative Common Share
Arrearages (as defined below) for any one or more
of the next four quarters, or
(3) comply with applicable law or any loan
agreement, security agreement, mortgage, debt
instrument or other agreement or obligation to
which the company is a party or by which the
company or any of its subsidiaries is bound or to
which any of their respective assets are subject.
With respect to Available Cash, the Board of Directors may not
establish cash reserves pursuant to (b) (2) above if the effect of
those reserves would be that the company is unable to distribute the
Target Quarterly Distribution on all common shares, plus any
cumulative Common Share Arrearage for that quarter; and disbursements
made by the company or cash reserves established, increased or
reduced after the end of that quarter but on or before the date of
determination of Available Cash for that quarter shall be deemed to
have been made, established, increased or reduced for purposes of
determining Available Cash within that quarter if the Board of
Directors so determines. However, Available Cash for the quarter in
which the dissolution and liquidation of the company occurs and any
quarter after that will equal zero.
(iv) Capital Improvements: Additions or improvements to the capital
assets owned by the company or the acquisition of existing, or the
construction of new, capital assets (including terminaling and
storage facilities and related assets), in each case made to increase
the operating capacity or revenue of the Company existing immediately
prior to such addition, improvement, acquisition or construction.
(v) Common Share Arrearages: Common Share Arrearages means the amount
by which the Target Quarterly Distribution in any quarter during the
Subordination Period exceeds the
<PAGE>
21
distribution of Available Cash from Operating Surplus actually made
for that quarter on all common shares issued and outstanding on or
after the Initial Issue Date, cumulative for that quarter and all
prior quarters during the Subordination Period; provided that the
Common Share Arrearages will not accrue interest.
(vi) Interim Capital Transactions: The following transactions, if
they occur prior to the dissolution and liquidation of the company,
are Interim Capital Transactions:
(i) any of the company's borrowings, refinancings of
indebtedness and sales of debt securities (other than
Working Capital Borrowings and other than for items
purchased on open account in the ordinary course of
business);
(ii) sales by the company of equity interests (other than any
common shares issued and sold to any of the company's
underwriters of the initial public offering of the common
shares for the exercise of their over-allotment option at
the time of the company's initial public offering); and
(iii) sales or other voluntary or involuntary dispositions of the
company's assets, except for sales or other dispositions of:
(a) inventory in the ordinary course of business,
(b) accounts receivable and other assets in the ordinary
course of business, and
(c) assets as a part of normal retirements or
replacements.
(vii) Operating Expenditures: All expenditures, including but not
limited to, taxes, debt service payments and capital expenditures,
are Operating Expenditures, except the following:
(a) payments or prepayments of principal and premium on
indebtedness:
(1) required in connection with the sale or other
disposition of assets; or
(2) made in connection with the refinancing or
refunding of indebtedness with the proceeds from
new indebtedness or from the sale of equity
interests.
For the purpose hereof, at the election and in the reasonable
discretion of the Board of Directors, any payment of principal or
premium will be deemed to be refunded or refinanced by any
indebtedness incurred or to be incurred by the company within 180
days before or after that payment to the extent of the principal
amount of that indebtedness.
(b) (1) capital expenditures made for Acquisitions or for
Capital Improvements;
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22
(2) payment of transaction expenses relating to Interim
Capital Transactions; or
(3) distribution(s) to shareholders, in the form of
dividend or otherwise.
For the purpose hereof, where capital expenditures are made partially
for Acquisitions or Capital Improvements and partially for other
purposes, the Board of Directors' allocation as made in good faith
between the amounts paid for each will be deemed conclusive.
(viii) Operating Surplus: For any period prior to the date of
dissolution and liquidation of the company on a cumulative basis,
Operating Surplus is:
(a) the sum of:
(1) US$7.5 million,
(2) any net positive working capital on hand as of the
close of business on the Initial Issue Date,
(3) all cash receipts for the period beginning on the
Initial Issue Date and ending on the last day of
that period, other than cash receipts from Interim
Capital Transactions, and
(4) all cash receipts after the end of that period but
on or before the date of determination of Operating
Surplus for that period resulting from Working
Capital Borrowings;
less
(b) the sum of:
(1) Operating Expenditures for the period beginning on
the Initial Issue Date and ending with the last day
of that period, and
(2) the amount of cash reserves that is necessary or
advisable to be kept in the reasonable discretion
of the Board of Directors to provide funds for
future Operating Expenditures.
For the purposes hereof, disbursements made or cash reserves
established, increased or reduced after the end of this period but on
or before the date of determination of Available Cash for this period
will be deemed to have been made, established, increased or reduced
for purposes of determining Operating Surplus within this period if
the Board of Directors so determines. However, Operating Surplus for
the quarter in which the company's dissolution and liquidation occurs
and any subsequent quarter will be equal to zero.
<PAGE>
23
(ix) Unrecovered Initial Price: At any time, the Unrecovered Initial
Price is the initial public offering price per common share issued on
the Initial Issue Date (the "Initial Price"), after:
(1) subtracting all distributions on or after the Initial Issue
Date to shareholders, in the form of dividend or otherwise,
from Interim Capital Transactions;
(2) subtracting any distributions of cash on or after the
Initial Issue Date in connection with the company's
dissolution and liquidation; and
(3) adjusting this price as the Board of Directors determined is
needed to reflect any distribution, subdivision or
combination of the common and/or subordinated shares on or
after the Initial Issue Date.
(x) Working Capital Borrowings: Working Capital Borrowings are
borrowings made by the company exclusively for working capital
purposes and made pursuant to a credit facility or other arrangement
that requires all borrowings under that arrangement to be reduced to
a relatively small amount each year for an economically meaningful
period of time, all in the reasonable judgment of the Board of
Directors.
17.2 Definition and determination of profit. The profit of any financial
year, by which term is meant the net profit according to the adopted
annual accounts of the company for such year, shall be determined by
the annual General Meeting.
17.3 Authority - distribution dividend/reserves. The Board of Directors is
the corporate body authorized to distribute and/or reserve profit of
the company, as established, from time to time in the form of
dividends by the General Meeting. In addition, the Board of Directors
may set up, cancel, and distribute from time to time from one or more
reserves to, or for the benefit of, its shareholders. Distributions
shall be paid in cash unless the Board of Directors has authorized a
distribution in kind.
17.4 Authority - distribution interim-dividend. If and to the extent that
the Board of Directors has the reasonable expectation that sufficient
profit shall be made for the relevant financial year, it may declare
and pay from time to time during a calendar quarter one or more
interim distributions on any class of shares in the form of
interim-dividend. At the time of a declaration and payment of interim
dividends, the Board of Directors may, by a duly adopted resolution
thereto, qualify any amounts payable or paid, which cannot ultimately
be covered by the profit for the relevant financial year, as payment
out of freely distributable reserves, including, but not limited to,
capital surplus reserves, insofar as available.
17.5 Certain effects of losses. In the event that the profit and loss
account shows a loss for any given year, which loss cannot be covered
by the reserves or compensated in another manner, no profit can be
distributed in any subsequent year, until such loss has been
recovered or otherwise offset by reserves.
<PAGE>
24
17.6 Payment of Available Cash/Target Quarterly Distribution.
17.6.1 General. The company shall pay, from legally available funds
therefore, on a quarterly basis, all of its Available Cash, in the
manner as set out in this article 17.6. For the purpose of this
article 17.6, whenever reference is made to a distribution of
Available Cash, out of Operating Surplus or Interim Capital
Transactions, such distributions shall be, with due observance of the
provisions of article 17.6.2 through 17.6.5, made by or on behalf of
the company in cash as a distribution from profit, as a dividend or
interim-dividend, as the case may be, or from freely distributable
reserves, including capital surplus reserves, to and for the benefit
of its shareholders.
17.6.2 Target Quarterly Distribution - common shares. The company shall, out
of Available Cash, pay an amount equal to US$0.45 per common share
per calendar quarter (hereinafter referred to as the "Target
Quarterly Distribution") or US$1.80 per common share on an annual
basis, plus any Common Share Arrearages from any prior quarters,
prior to any distributions on the subordinated shares in the manner
set forth below in this article.
17.6.3 Target Quarterly Distribution - subordinated shares. Only after the
common shares have received the Target Quarterly Distribution plus
any Common Share Arrearages thereon, the company shall, out of
Available Cash, pay on each subordinated share an amount equal to the
Target Quarterly Distribution per calendar quarter, provided however,
that no subordinated share shall be entitled to any arrearages.
17.6.4 Sources of funds. For the purpose of a distribution by the company to
pay the Target Quarterly Distribution and such other amounts as set
out in this article to its shareholders, the company shall use as
source of funds for payment of Available Cash funds from Operating
Surplus and/or from Interim Capital Transactions, with due observance
of the limitation set out in this article and article 17.6.8 in
particular. In this respect, for accounting purposes or otherwise,
all Available Cash paid as a distribution to shareholders from any
source will be treated as a distribution from Operating Surplus until
the sum of all Available Cash paid as a distribution since the
Initial Issue Date equals the Operating Surplus as of the end of the
quarter prior to that distribution. Any Available Cash in excess of
that amount (regardless of its source) will be deemed to be from
Interim Capital Transactions and paid accordingly. If Available Cash
from Interim Capital Transactions is paid as a distribution for each
common share in an aggregate amount per common share equal to the
Initial Price of that common share, plus any Common Share Arrearages,
the distinction between Operating Surplus and Interim Capital
Transactions will cease, and all distributions of Available Cash will
be treated as if they were made from Operating Surplus.
17.6.5 Dividend and other distributions. With due observance of the
foregoing article 17.6.1 through 17.6.4, the company shall pay on
each common share, each subordinated share and each incentive share
the following amounts out of Available Cash:
<PAGE>
25
17.6.5.1 Distributions from Operating Surplus during Subordination Period.
Distributions of Available Cash from Operating Surplus, if any, for
any quarter during the Subordination Period will be made in the
following manner:
(a) First, 100% to the common shares, pro rata, until each
outstanding common share has been paid an amount equal to the Target
Quarterly Distribution for that quarter;
(b) Second, 100% to the common shares, pro rata, until each
outstanding common share has been paid an amount equal to any Common
Share Arrearages accrued and unpaid for any prior quarters during the
Subordination Period;
(c) Third, 100% to the subordinated shares, pro rata, until each
outstanding subordinated share has been paid an amount equal to the
Target Quarterly Distribution for that quarter; and
(d) Thereafter, any Available Cash from Operating Surplus for that
quarter will be paid among the holders of common shares and
subordinated shares and the holders of incentive shares in the
following manner:
(1) First, 85% to all common and subordinated shares, pro rata, and
15% to the incentive shares, pro rata, until the common shares and
subordinated shares have received (including the Target Quarterly
Distribution) a total of $0.495 for that quarter to each outstanding
common share and subordinated share (the "first additional
distribution");
(2) Second, 75% to all common shares and subordinated shares, pro
rata, and 25% to the incentive shares, until the common and
subordinated shares have received (including the Target Quarterly
Distribution) a total of $0.675 for that quarter to each outstanding
common share and subordinated share (the "second additional
distribution");
(3) Thereafter, 50% to all common shares and subordinated shares, pro
rata, and 50% to the incentive shares, pro rata.
17.6.5.2 Distribution from Operating Surplus after Subordination Period.
Distributions paid out Available Cash from Operating Surplus, if any,
for any quarter after the Subordination Period will be made in the
following manner:
(a) First, 100% to all common shares, pro rata, until each share has
been paid an amount equal to the Target Quarterly Distribution for
that quarter; and
(b) Thereafter, in the manner set forth in article 17.6.5.1, section
(d) (1) through (3) set forth above, with due observance of the fact
that no subordinated shares shall be outstanding after the
Subordination Period.
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26
17.6.5.3 Distributions from Interim Capital Transactions. Distributions of
Available Cash from Interim Capital Transactions for any quarter
during or after the Subordination Period will be made in the
following manner:
(a) First, 100% to the common shares and subordinated shares, if any,
pro rata until each outstanding common share has been paid Available
Cash from Interim Capital Transactions in an aggregate amount per
common share equal to the Initial Price;
(b) Second, 100% to the common shares until each outstanding common
share has been paid Available Cash from Interim Capital Transactions
in an aggregate amount equal to any unpaid Common Share Arrearages;
and
(c) Thereafter, all distributions of Available Cash from Interim
Capital Transactions will be made as if they were from Operating
Surplus, in the manner of article 17.6.5.1 and 17.6.5.2, as
applicable.
17.6.6.1 Adjustment of Target Quarterly Distribution - additional distribution
levels. Upon a distribution of Available Cash from Interim Capital
Transactions, the Target Quarterly Distribution and the additional
distribution levels as referred to in article 17.6.2 and 17.6.5.1 (d)
(1) through (3), respectively, will be adjusted by the Board of
Directors downward by multiplying each such amount by a fraction
equal to:
(1) the Unrecovered Initial Price;
divided by
(2) the Initial Price, or the Unrecovered Initial Price, as the case
may be, of the common shares immediately prior to that distribution
of Available Cash from Interim Capital Transactions.
17.6.6.2 Additional adjustments. In addition to the provisions of article
17.6.6.1 above, in the event of any combination or subdivision of
common shares (whether effected by a distribution by way of dividend
or otherwise payable in common shares or otherwise) but not by reason
of the issuance of additional common shares for cash or property, the
following amounts will be proportionately adjusted upward or
downward, as appropriate, by the Board of Directors:
(a) the Target Quarterly Distribution;
(b) the additional distribution levels;
(c) the Unrecovered Initial Price;
<PAGE>
27
(d) the number of additional common shares issuable during the
Subordination Period without a shareholder vote pursuant to the
provision of article 4.3 of these articles of incorporation;
(e) the number of common shares outstanding upon conversion of
subordinated shares; and
(f) other amounts calculated on a per common share and/or
subordinated share basis.
17.6.7 Payment of Available Cash; holders of record entitled thereto. Each
distribution from Available Cash shall be made by the company to the
holders of record as they appear in the Register on such record date,
approximately forty-five days after the end of each calendar quarter,
commencing with the calendar quarter ending June 30, 1999, as shall
be fixed by the Board of Directors from time to time. Any
distribution of the Target Quarterly Distribution or of amounts of
the additional distribution levels as referred to in article 17.6.2
and 17.6.5.1, respectively, for the period from the Initial Issue
Date through June 30, 1999 will be adjusted downward by the Board of
Directors based on the actual length of such period.
17.6.8 Amount of distributable Available Cash as dividends or otherwise -
indenture limitation - senior notes indenture. If on any distribution
date, being a date as set by the Board of Directors to pay the Target
Quarterly Distribution out of Available Cash and/or such or other
amounts on the shares as set out in this article, during or after the
Subordinated Period, an Indenture Limitation (as defined below) is in
effect, the Board of Directors shall determine the amount, if any, of
dividends or other distributions out of Available Cash on the shares
that the company shall be permitted to pay in cash to its
shareholders consistent with the Indenture Limitation. For the
purpose hereof, an "Indenture Limitation" shall be deemed to be in
effect on any date to the extent that on such date any section of the
Indenture shall prohibit or make impossible the payment of cash
dividends by the company's subsidiaries to the company on such date.
The "Indenture" means (i) that certain indenture dated as of November
27, 1996, as amended, pursuant to which the 113/4Mortgage Notes Due
2003 have been issued by Statia Terminals International N.V., a
Netherlands Antilles company, and Statia Terminals Canada,
Incorporated, a Nova Scotia, Canada company and as subsidiaries of
the company, as in effect from time to time and (ii) any successor
indenture pursuant to which debt obligations have been issued
refinancing the debt obligation referred to in clause (i) above.
17.6.9 Deferral of payment on subordinated shares. The company shall with
respect to any payment of Available Cash on the subordinated shares,
defer the payment of the first US$ 6.8 million (being the amount
equal to the aggregate Target Quarterly Distribution on the
subordinated shares for one year) in the form of cash distributions,
by dividend or otherwise, until the end of the Deferral Period (as
defined below), but the same will be deemed paid for purposes of
determining Available Cash, Operating Surplus, Adjusted Operating
Surplus, additional distribution levels, early conversion rights and
the expiration of the Subordinated Period. For the purpose hereof,
the Deferral Period shall mean the period from the Initial
<PAGE>
28
Issue Date until the tests set forth below have been met for any
quarter ending on or after June 30, 2001 for which:
1) distributions (by dividend or otherwise) of Available Cash
from Operating Surplus on the common shares and subordinated
shares (including deferred distributions) for each of the
two consecutive non-overlapping four-quarter periods
immediately preceding the date of determination that equaled
or exceeded the sum of the Target Quarterly Distribution on
all of the outstanding common shares and subordinated shares
during such periods;
2) the Adjusted Operating Surplus generated during each of the
two consecutive non-overlapping four-quarter periods
immediately preceding the date of determination that equaled
or exceeded the sum of the Target Quarterly Distribution on
all of the common and subordinated shares that were
outstanding on a fully diluted basis during those periods;
and
3) there are no outstanding Common Share Arrearages.
17.6.10 Payment after deferral period. After the Deferral Period, the company
will pay on the subordinated shares until the deferred distributions
have been paid in full all Available Cash from Operating Surplus
remaining after all Common Share Arrearages and the Target Quarterly
Distributions have been paid on all common shares and subordinated
shares prior to any further distribution under the provisions of this
article.
AMENDMENT OF THE ARTICLES OF INCORPORATION; DISSOLUTION
AND LIQUIDATION OF THE COMPANY/DISTRIBUTION OF LIQUIDATION
PROCEEDS/PROHIBITION AGAINST CERTAIN ACTIONS ADVERSE TO
CERTAIN CLASSES OF SHARES
ARTICLE 18
18.1 Resolutions to amend the articles of incorporation, to dissolve the
company or to sell its assets. Resolutions to amend the articles of
incorporation, to dissolve the company or to sell all or
substantially all of the assets of the company, may only be taken in
a General Meeting by at least a sixty-six and two thirds percent
majority of votes cast at which meeting at least one-half of the
outstanding voting capital is represented.
18.2 Second meeting in certain circumstances. If the required capital is
not represented at the meeting referred to in article 18.1, a second
meeting shall be convened, to be held within one month after the
first meeting, at which (second) meeting valid resolutions may then
be taken with an absolute majority of votes cast, irrespective of the
issued and outstanding voting capital represented.
18.3 Prohibition against certain actions adverse to incentive shares. In
accordance with the provisions of Article 93a of the Commercial Code
of the Netherlands Antilles, the General
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29
Meeting shall not, without the vote of the absolute majority of
holders of incentive shares then outstanding, amend, alter or repeal
any of the provisions of these articles of incorporation so as to
affect adversely the rights or powers of such incentive shares.
18.4 Procedures for liquidation. In the event of a dissolution of the
company, the liquidation shall take place under such provisions as
the General Meeting shall determine with due observance of (i) the
remaining paragraphs of this article 18, and (ii) the provisions of
applicable law on dissolution and liquidation of Netherlands Antilles
companies.
18.5 Allocation of profits. If the profit and loss account covering the
financial year closing per the date of the dissolution of the company
shows a profit, this profit shall be allocated in conformity with the
provisions of article 17 hereof.
18.6 Liquidation Event--definition and allocation to shares. In case of
any dissolution, liquidation or winding up of the affairs of the
company, whether voluntary or otherwise (a "Liquidation Event"),
after satisfaction of all the company's creditors in the order of
priority as set out by or under applicable law, proceeds of such
liquidation will be distributed to the holders of common and
subordinated shares and the holders of incentive shares in accordance
with their respective priorities as described below, provided
however, that the holders of common shares shall be entitled to
receive, out of the assets of the company available for distribution
to its shareholders, in cash, (i) their Unrecovered Initial Price,
(ii) the amount of the Target Quarterly Distribution due on each such
share, plus (iii) any arrearages, before any distribution shall be
made to the holders of any other class of shares, as further
described below. If the company is dissolved and liquidated before
the end of the Subordination Period, any distribution will be made as
follows:
(a) First, 100% to the common shares, pro rata, until each common
share receives an amount equal to the sum of:
(1) the Unrecovered Initial Price of such common share;
(2) the amount of the Target Quarterly Distribution for the
quarter(s) during which the company's liquidation occurs;
and
(3) any Unpaid Common Share Arrearages on that common share;
(b) Second, 100% to the subordinated shares, pro rata, until each
subordinated share receives an amount equal to the sum of:
(1) the Unrecovered Initial Price of that subordinated share;
(2) the amount of the Target Quarterly Distribution for the
quarter(s) during which the company's liquidation occurs;
and
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30
(3) any unpaid deferred distributions on that subordinated share;
(c) Third, 85% to the common shares and subordinated shares, pro
rata, and 15% to the incentive shares, pro rata, until there has been
allocated under this paragraph (c) an amount per common share and
subordinated share equal to:
(1) the cumulative excess of the first additional distribution
over the Target Quarterly Distribution for all common shares
and subordinated shares for each quarter of the company's
existence as from the Initial Issue Date,
less
(2) the cumulative amount per share of any prior distributions
(by dividend or otherwise) of Available Cash from Operating
Surplus in excess of the Target Quarterly Distribution that
the company paid 85% to the common shares and subordinated
shares, pro rata, and 15% to the incentive shares, pro rata,
for each quarter of the company's existence as from the
Initial Issue Date;
(d) Fourth, 75% to the common shares and subordinated shares, pro
rata, and 25% to the incentive shares, pro rata, until there has been
allocated under this paragraph (d) an amount per common share and
subordinated share equal to:
(1) the cumulative excess of the second additional distribution
over the first additional distribution for each quarter of
the company's existence as from the Initial Issue Date,
less
(2) the cumulative amount per share of any distributions of
Available Cash from Operating Surplus in excess of the first
target distribution that the company paid 75% to the common
shares and subordinated shares, pro rata, and 15% to the
incentive shares, pro rata, for each quarter of the
company's existence as from the Initial Issue Date; and
(e) Thereafter, 50% to all common shares and subordinated shares, pro
rata, and 50% to the incentive shares, pro rata.
18.7 If the dissolution and liquidation of the company occurs after the
Subordination Period so as a result of which only common shares and
incentive shares, if any, are outstanding, all of paragraph (b) above
will no longer be applicable, and any reference to distribution on
subordinated shares need no longer be followed.
18.8 Liquidation event--maintenance of books and records. During a period
of ten years after the end of the liquidation relating to any
Liquidation Event, the books and records of the
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31
company shall remain in the custody of the person designated for that
purpose by the General Meeting.
SEPARATE MEETINGS OF CLASSES OF SHARES/
ACTION BY WRITTEN CONSENT
ARTICLE 19
19.1 General. Separate meetings of the holders of any class of shares
shall be held and may be convened by the Board of Directors at the
request of the holders of the respective classes of shares, being the
holders of common shares, subordinated shares or incentive shares, by
the holders of ten percent of any shares of such class issued and
outstanding (each a "class meeting").
19.2 Convocation. A convocation of such class meeting shall be given by
means of a written notice mailed not fewer than ten days and no more
than thirty days prior to the date of the meeting to the address of
each holder of a class of shares, appearing in the Register.
19.3 Agenda. The notice shall contain the agenda of the meeting or shall
state that it may be examined by the holders of such class of shares
for inspection at the registered office of the company.
19.4 Separate meeting as determined by board of directors. Separate
meetings may also be held as often as the Board of Directors deems
necessary.
19.5 Resolutions outside meetings by written consent for a class of shares
only; records. Resolutions of holders of a class of shares may also
be adopted by written consent (without recourse to a separate meeting
of holders of a class as provided herein), provided (i) all holders
of shares of such class have had an opportunity to express themselves
in connection with such action by written consent and (ii) such
expression is made in writing. The Board of Directors shall keep a
record of the resolutions thus made by written consent.
19.6 Application of provisions of articles of incorporation and laws. All
the provisions of these articles of incorporation and the laws of the
Netherlands Antilles as to General Meetings, in as far as possible,
apply to separate meetings, except as otherwise specifically provided
in this article 19.
Final declaration
At the time of the execution of the notarial deed of amendment, containing the
aforementioned amendment to the articles of incorporation, the following
actions shall, among others, take place and shall be deemed to take place
simultaneously: (a) the company will issue at least 7,600,000 Common Shares
and with the proceeds therefrom redeem all outstanding shares of Preferred
Stock, (b) the company will reclassify the 47,119 shares of its outstanding
Common Stock as 471,190 subordinated shares, (c) the company will issue an
additional 3,328,810 subordinated shares plus
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32
38,000 incentive rights, and (d) each of Messrs. Jonathan R. Spicehandler, and
Ernest Voges shall be classified as a Class A director, each of Messrs. Justin
B. Wender, Francis Jungers, and James L. Holloway III shall be classified as a
Class B director and each of Messrs. John K. Castle, James G. Cameron and
David B. Pittaway shall be classified as a Class C director.
<PAGE>
Exhibit 4.17
================================================================================
FORM OF REGISTRATION RIGHTS AGREEMENT
between
STATIA TERMINALS GROUP N.V.
and
STATIA TERMINALS HOLDINGS N.V.
Dated as of April [ ], 1999
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of April __, 1999, by
and among STATIA TERMINALS GROUP N.V., a Netherlands Antilles corporation (the
"Company") and STATIA TERMINALS HOLDINGS N.V., a Netherlands Antilles
corporation ("Statia Holdings").
RECITALS
WHEREAS, Statia Holdings has been formed to hold all of the
issued and outstanding Class B Common Shares (the "Subordinated Shares"), Class
C Common Shares (the "Incentive Rights") and any Class A Common Shares issued
upon conversion of the Subordinated Shares (the "Common Shares" and, together
with the Subordinated Shares and the Incentive Rights, the "Shares") of the
Company held by the shareholders of Statia Holdings upon the closing of the
offering of 7,600,000 Common Shares by the Company;
WHEREAS, Statia Holdings may, from time to time, distribute
the Shares to the holders of its capital stock and Statia Holdings and the
holders of its capital stock have entered into a Stockholders Agreement, dated
the date hereof, pursuant to which such stockholders agreed that upon such
distribution, they will automatically assume the rights and obligations of a
Stockholder under this Agreement; and
WHEREAS, the Company has agreed to provide Statia Holdings and
the holders of capital stock of Statia Holdings with certain registration rights
as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Definitions. The following terms, as used in this
Agreement, shall have the meanings set forth below:
"Authorized Stockholder" shall mean each of the following:
(a) Statia Holdings so long as it holds any Common Shares
or Subordinated Shares;
(b) Castle Harlan Partners II, L.P., a Delaware limited
partnership ("CHP") if (i) Statia Holdings has
distributed any Common Shares or Subordinated Shares
to CHP or to any CHP Affiliate, (ii) CHP or CHP
Affiliates, either directly or through their pro rata
interest in the Shares held by Holdings, hold at
least 35% of the Shares contributed by CHP and CHP
Affiliates pursuant to the Stockholders Agreement by
and among Statia Holdings and its stockholders dated
the date hereof and (iii) CHP has not transferred its
rights hereunder to a CHP Designee;
(c) the CHP Designee; and
<PAGE>
(d) the holders of a majority of the Shares held by
Statia Holdings on the date hereof, acting through a
Majority Representative.
"CHP Affiliate" shall mean (a) any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with CHP and (b) any officer, director, employee or agent of CHP or
affiliate of CHP.
"CHP Designee" shall mean any Person to whom CHP and/or its
affiliates transfers all or substantially all of the Shares held by CHP and its
affiliates on the date hereof and regarding which transfer CHP has notified the
Company in writing such notice to include a designation of the transferee as the
CHP Designee under this Agreement.
"Company" shall have the meaning set forth in the Preamble
hereof;
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and "under common Control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise;
"Exchange Act" shall mean the United States Securities
Exchange Act of 1934, as amended;
"Final Prospectus" shall have the meaning set forth in Section
2.4(f)(i);
"Majority Representative" shall mean that Person appointed by
the holders of a majority of the Shares held by Statia Holdings on the date
hereof to exercise exclusively all rights of such holders under this Agreement
and with whom the Company shall be entitled to deal exclusively, and rely on any
act taken or any notice given by in respect of all such rights, including,
without limitation, the giving of all notices under this Agreement.
"Person" shall mean and include any individual, partnership,
joint venture, corporation, association, company, limited liability company,
joint-stock company, trust, unincorporated organization, government entity,
department or agency thereof, or any other entity;
"Recitals" shall mean the recitals of this Agreement;
"Registration Expenses" shall have the meaning set forth in
Section 2.4(e);
"SEC" shall mean United States Securities and Exchange
Commission;
"Securities Act" shall mean the United States Securities Act
of 1933, as amended;
"Shares" shall have the meaning set forth in the Recitals;
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"Stockholders" shall mean (a) Statia Holdings and (b) CHP and
any other person who shall, after the date hereof, acquire Shares from Statia
Holdings;
"Subordinated Shares" shall have the meaning set forth in the
Recitals.
Section 2. Registration Rights.
2.1 Registration Upon Request. If the Company shall be
requested in writing by an Authorized Shareholder (the "Initiating
Shareholder"), on one or more occasions, to effect the registration under the
Securities Act of all, or any part, of the Shares held by the Initiating
Shareholder (which request shall specify the aggregate number of Shares intended
to be offered and sold by the Initiating Stockholder, shall describe the nature
or method of the proposed offer and sale thereof and shall contain an
undertaking by the Initiating Stockholder to cooperate with the Company in order
to permit the Company to comply with all applicable requirements of the
Securities Act and the rules and regulations thereunder and to obtain
acceleration of the effective date of the registration statement), the Company
shall (a) promptly notify each other Shareholder, if applicable, of such
proposed registration, and (b) use its reasonable efforts to effect, as
expeditiously as possible, the registration on an appropriate form under the
Securities Act of the Shares which the Company has been requested to register by
the Initiating Shareholder and each other Stockholder who requested registration
by notice to the Company within fifteen (15) days of delivery of the Company's
notice (collectively, the "Selling Stockholders") subject to the limitations set
forth in Section 2.3(a).
2.2 Piggyback Registration.
(a) If the Company at any time proposes to register any of its
common shares or subordinated shares under the Securities Act (other than a
registration effected solely to implement an employee benefit plan, or a merger,
acquisition or exchange offer to which Rule 145 promulgated under the Securities
Act is applicable), whether or not for sale for its own account, the Company
shall give prompt written notice to the Stockholders of each such intended
registration by the Company and the Stockholders shall be entitled to request
that the Company include in any such registration any number of Shares then
owned by the Stockholders, subject to the limitations set forth in Section
2.3(a)).
(b) Upon the written request of any Stockholder made within
twenty (20) days after the giving by the Company of any such notice of intention
to register (which request shall specify the number of Shares intended to be
disposed of by the Stockholder), the Company shall use its reasonable efforts to
effect the registration under the Securities Act of all Shares which the Company
has been so requested to register by the Stockholder (subject to the
restrictions set forth in Section 2.3(a)); provided, however, that (i) if at any
time after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register the common shares or subordinated shares it had originally proposed to
register, the Company may, at its election, give written notice of such
determination to such Stockholder and, thereupon, shall be relieved of its
obligation to register any Shares on behalf of the Stockholder in connection
with such registration (but not from its obligation to pay the Registration
Expenses
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<PAGE>
(as hereinafter defined) in connection therewith), and (ii) if such registration
involves an underwritten offering, the Stockholder shall sell its Shares to the
underwriters selected by the Company on the same terms and conditions as apply
to the Company or, if the Company is not selling any common shares or
subordinated shares, to the other sellers of the Shares being registered.
2.3 General Provisions.
(a) If a registration pursuant to this Section 2 involves an
underwritten offering and the managing underwriter advises the Company in
writing that, in its opinion, the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering,
then, (i) if the registration was initiated by the Company pursuant to Section
2.2(a) hereof, the Company shall include in such registration (A) first, the
securities the Company proposes to sell, and (B) second, the number of Shares
requested by each Stockholder to be included in such registration which, in the
opinion of such underwriters, can be sold, such amount to be allocated pro rata
among the Stockholders requesting registration in accordance with the number of
Shares owned by such Stockholder, and (ii) if the registration was initiated by
the Initiating Stockholder pursuant to Section 2.1 hereof, then the Company
shall include in such registration (A) first, the number of Shares requested by
each Stockholder (including the Initiating Stockholder) to be included in such
registration which in the opinion of such underwriters can be sold, such amount
to be allocated pro rata among the Stockholders requesting registration
(including the Initiating Stockholder) in accordance with the number of Shares
then owned or deemed owned by such Stockholder, and (B) second, the number of
common shares or subordinated shares requested by the Company to be included in
such registration.
(b) Each Stockholder shall furnish the Company such
information regarding the Stockholder and the distribution of its Shares as the
Company may from time to time reasonably request in writing in connection with
the registration statement (and the prospectus contained therein). Failure of a
prospective seller of Shares to furnish the information as described in this
Section 2.3(b) shall not affect the obligations of the Company under this
Section 2 to remaining sellers who furnish such information and agreements
unless, in the reasonable opinion of counsel to the Company or the underwriters,
such failure impairs or may impair the offering or the legality of the
registration statement or the underlying offering.
(c) The holders of Shares included in the registration will
not (until further notice) effect sales thereof after receipt of telegraphic or
written notice from the Board of Directors of the Company to suspend sales to
permit the Company to correct or update a registration statement or prospectus;
but the obligations of the Company with respect to maintaining any registration
statement current and effective shall be extended by a period of days equal to
the period such suspension is in effect unless (i) such extension would result
in the Company's inability to use the financial statements in the registration
statement initially filed pursuant to the Initiating Stockholder's request and
(ii) such correction or update did not result from the Company's acts or
failures to act.
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<PAGE>
(d) The Company shall have the right to designate the managing
underwriter in any underwritten offering.
(e) All expenses incident to all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Shares), rating agency fees, printing expenses, messenger
and delivery expenses, the fees and expenses incurred in connection with the
listing of the securities to be registered on securities exchanges or NASDAQ,
fees and disbursements of counsel for the Company and of one counsel per
jurisdiction to all of the Selling Stockholders (selected by the Stockholders
selling a majority of the shares sold by all of the Stockholders), fees and
expenses of the Company's independent certified public accountants, the
reasonable fees and expenses of any special experts retained by the Company in
connection with such registration and the fees and expenses of other persons
retained by the Company (all such expenses being herein called "Registration
Expenses") will be borne by the Company. Except as provided above, the Company
will not have any responsibility for any of the direct expenses of any
Stockholder incurred in connection with any registration hereunder, including,
without limitation, underwriting discounts or commissions attributable to the
sale of such Stockholder's Shares.
(f) (i) In connection with any registration of each
Stockholder's Shares pursuant to Sections 2.1 or 2.2 hereof, the Company agrees
to indemnify and hold harmless, to the fullest extent permitted by law, each
Stockholder, each agent, officer, director of such Stockholder and any person
Controlling such Stockholder, against all losses, claims, damages, liabilities
and expenses (including attorneys' fees and disbursements) caused by any untrue
or alleged untrue statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or any violation (or alleged
violation) by the Company of the Securities Act, the Exchange Act or state
securities laws or any rule or regulation promulgated under the Securities Act,
the Exchange Act or a state securities law, in each case applicable to the
Company, and will reimburse each such indemnitee for any legal and any other
fees and expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, provided, however,
that the Company will not be liable to any indemnitee hereunder in any such case
to the extent that any such claim, loss, damage or liability is caused by any
untrue statement or omission so made in strict conformity with written
information furnished to the Company by an instrument duly executed by such
indemnitee and stated to be specifically for use therein, and provided further
that the foregoing indemnity agreement is subject to the condition that, insofar
as it relates to any such untrue statement (or alleged untrue statement) or
omission (or alleged omission) made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the SEC at the time the
registration statement becomes effective or in the amended prospectus filed with
the SEC pursuant to Rule 424(b) (the "Final Prospectus"), such indemnity
agreement shall not inure to the benefit of any underwriter, or any indemnitee
if there is no underwriter, if a copy of the Final Prospectus was not furnished
to the person or entity asserting the loss, liability, claim or damage at or
prior to the time such furnishing is required by the Securities Act; provided,
further, that the indemnity agreement contained in this subsection 2.3(f)(i)
shall not apply to
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<PAGE>
amounts paid in settlement of any such claim, loss, damage, liability or action
if such settlement is effected without the consent of the Company, which consent
shall not be unreasonably withheld.
(ii) In connection with any registration in which the
Stockholders are participating, each Stockholder agrees to indemnify and hold
harmless, to the full extent permitted by law, the Company, its directors and
officers and each person who controls the Company (within the meaning of the
Securities Act) and each other selling Stockholder, and in connection with an
underwritten offering, each underwriter and each person who controls the
underwriters (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses caused by any untrue or alleged untrue
statement of a material fact contained in any registration statement, prospectus
or preliminary prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, to the extent, but only to the extent, that such untrue statement or
omission was made in reliance upon and in strict conformity with written
information (including, without limitation, written negative responses to
inquiries) furnished to the Company by an instrument duly executed by such
Stockholder and stated to be specifically for use in such prospectus, offering
circular or other document (or related registration statement, notification or
the like) or any amendment or supplement thereto; provided further that the
foregoing indemnity agreement is subject to the condition that, insofar as it
relates to any such untrue statement (or alleged untrue statement) or omission
(or alleged omission) made in the preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the Commission at the time the
registration statement becomes effective or in the Final Prospectus, such
indemnity agreement shall not inure to the benefit of (A) the Company and (B)
any underwriter, if there is no underwriter, if a copy of the Final Prospectus
was not furnished to the person or entity asserting the loss, liability, claim
or damage at or prior to the time such furnishing is required by the Securities
Act; provided, further, that this indemnity shall not be deemed to relieve any
underwriter of any of its due diligence obligations; provided, further, that the
indemnity agreement contained in this subsection 2.3(f)(ii) shall not apply to
amounts paid in settlement of any such claim, loss, damage, liability or action
if such settlement is effected without the consent of the Stockholder or
underwriter, as the case may be, which consent shall not be unreasonably
withheld; and provided, further, that the obligations of such Stockholder shall
be limited to an amount equal to the net proceeds received by such Stockholder
from the sale of Shares in such offering as contemplated herein, unless such
claim, loss, damage, liability or action resulted from such Stockholder's
fraudulent misconduct.
(iii) Any person entitled to indemnification hereunder agrees
to give prompt written notice to the indemnifying party after the receipt by
such person of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for which such
person will claim indemnification or contribution pursuant to this Agreement
and, unless in the reasonable judgment of such indemnified party a conflict of
interest may exist between such indemnified party and the indemnifying party
with respect to such claim, permit the indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to such indemnified party. If
the indemnifying party is not entitled to, or elects not to, assume the defense
of a claim, it will not be obligated to pay the fees and expenses of more
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than one counsel with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim, in which event the indemnifying party shall be obligated to pay the fees
and expenses of such additional counsel or counsels. Notwithstanding anything to
the contrary contained in this subsection 2.3(f)(iii), the omission by any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this subsection 2.3(f)(iii) except
to the extent that the omission results in a failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
the failure to give notice. No indemnifying party, in the defense of any such
claim or litigation, shall consent, except with the consent of each indemnified
party, to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation. The indemnifying party will not be subject to any liability
for any settlement made without its consent.
(iv) If the indemnification provided for in this Section
2.3(f) from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 2.3(f)(iii), any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 2.3(f)(iv) were determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the immediately
preceding paragraph. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11 of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 2.3(f), the
indemnifying parties shall indemnify the indemnified party to the full extent
provided in Sections 2.3(f)(i) and 2.3(f)(ii) without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 2.3(f)(iv).
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(v) The reimbursement required by this Section 2.3(f) shall be
made by periodic payments during the course of the investigation or defense, as
and when bills are received or expenses incurred.
The obligation of the Company under this Section 2.3(f) shall
survive the completion of any offering of securities in a registration statement
under this Section 2, or otherwise.
(g) For so long as the Company is subject to the reporting
requirements of either Section 13 or Section 15(d) of the Exchange Act, the
Company will timely file with the SEC such information as the SEC may require
under either of said Sections; and in such event, the Company shall use its best
efforts to take all action as may be required as a condition to the availability
of Rule 144 under the Securities Act (or any successor exemptive rule
hereinafter in effect) with respect to its common shares and subordinated
shares. The Company shall furnish to each Stockholder forthwith (i) a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144, (ii) a copy of the most recent annual or quarterly report of the
Company as filed with the SEC, and (iii) such other reports and documents as the
Stockholders may reasonably request in availing itself of any rule or regulation
of the SEC allowing the Stockholders to sell any common shares and subordinated
shares without registration.
Section 3. Miscellaneous.
3.1 Expenses. Except as expressly provided otherwise in this
Agreement, the parties hereto shall pay all of their own expenses, relating to
the transactions contemplated by this Agreement, including, without limitation,
the fees and expenses of their respective counsel and financial advisers.
3.2 Applicable Law. This Agreement shall be governed by, and
construed and enforced in accordance with and subject to, the laws of the State
of New York applicable to agreements made and to be performed entirely within
such State.
3.3 Jurisdiction, Agents for Service of Process. Any judicial
proceeding brought against any of the parties to this Agreement on any dispute
arising out of this Agreement or any matter related hereto may be brought in the
courts of the State of New York, or the United States District Court for the
Southern District of New York, and, by execution and delivery of this Agreement,
each of the parties to this Agreement accepts to be bound by any judgment
rendered thereby in connection with this Agreement.
3.4 Notices. Notices and other communications provided for
herein shall be in writing in the English language, shall be delivered by hand
or overnight courier service of recognized standing or sent by telecopy or first
class mail, postage prepaid, shall be deemed given when and actually received
and shall be addressed in the case of each party as follows (telephone numbers
being included in the following information for informational purposes) or to
such other address as shall be specified by notice to each other party:
-8-
<PAGE>
(i) If to the Company, to
Statia Terminals Group N.V.
Tumble Down Dick Bay
Sint Eustatius
Netherlands Antilles
Attention: Jack R. Pine
(ii) If to Statia Holdings, to:
Statia Terminals Holdings N.V.
c/o Statia Terminals Group N.V.
Tumble Down Dick Bay
Sint Eustatius
Netherlands Antilles
Attention: Jack R. Pine
3.5 Entire Agreement. This Agreement, including the other
documents referred to herein which form a part hereof, contains the entire
understanding of the parties with respect to the subject matter hereof. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
3.6 Amendments and Waivers. The failure of any party to seek
redress for the violation of or to insist upon the strict performance of any
term of this Agreement shall not constitute a waiver of such term and such party
shall be entitled to enforce such term without regard to such forbearance. This
Agreement may be amended, each party hereto may take any action herein
prohibited or omit to take action herein required to be performed by it, and any
breach of or compliance with any term or provision herein may be waived only by
the written consent or written waiver of the Company and Statia Holdings. Such
consent or waiver shall be effective only in the specific instance and for the
specific purpose for which given.
3.7 Severability. If any term of this Agreement as applied to
any person or to any circumstance is prohibited, void, invalid or unenforceable
in any jurisdiction, such term shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or invalidity without in any way affecting any
other term of this Agreement or affecting the validity or enforceability of this
Agreement or of such provision in any other jurisdiction. The parties to this
Agreement shall in good faith agree on a modification of the prohibited, void,
invalid or unenforceable term which renders it valid, legal or enforceable (as
the case may be) and which as closely as possible reflects the original intent
of the parties.
3.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
3.9 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf on any Person other than the
-9-
<PAGE>
parties hereto and any Person expressly entitled to indemnification or
contribution under Section 2.
3.10 Headings. The headings in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretations of the Agreement.
-10-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused its
name to be hereunto subscribed personally or by such party's officer thereunto
duly authorized, all as of the day and year first above written.
STATIA TERMINALS GROUP N.V.
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
STATIA TERMINALS HOLDINGS N.V.
By:___________________________________
Name:
Title:
By:__________________________________
Name:
Title:
-11-
<PAGE>
Exhibit 5.1
[Letterhead of Smeets Thesseling van Bokhorst Spigt]
April 19, 1999
Statia Terminals Group N.V.
c/o Tumbledown Dick Bay
St. Eustatius, Netherlands Antilles
Dear Sirs:
We have acted as special Netherlands Antilles counsel to Statia Terminals Group
N.V., a corporation incorporated and existing under the laws of the Netherlands
Antilles (the "Company"), in connection with the proposed public offering of
7,600,000 shares of the Company as more fully described in the Registration
Statement on Form S-1 (File No. 333-72317), as amended (the "Registration
Statement") filed by the Company with the Securities and Exchange Commission
pursuant to the United States Securities Act of 1933, as amended.
We have examined the articles of incorporation (Dutch text, and English
translation thereof) of the Company, as proposed to be amended at the time of
completion of the proposed offering, in the form of Exhibit 3.2 to the
Registration Statement. We have also examined the corporate proceedings relating
to the proposed offering of shares by the Company as contemplated in the
Registration Statement. In rendering this opinion we are opining on the matters
set forth below insofar as they relate to and are governed by the laws of the
Netherlands Antilles as currently in effect. We have made no investigation of
and express no opinion in relation to the laws of any jurisdiction other than
the Netherlands Antilles.
Based upon the foregoing and such further examination and inquiries as we have
deemed necessary, we are of the opinion that, upon amendment of the articles of
the Company as contemplated, the 7,600,000 shares to be sold, as contemplated by
the Registration Statement, will have been duly authorized and, when issued,
sold and paid for as contemplated by the aforesaid Registration Statement, will
have been legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the captions "Risk
Factors - Risks Inherent in the Common Shares - You may not be able to sue us
effectively in the Netherlands Antilles or Canada,"
<PAGE>
Statia Terminals Group N.V.
Page 2
"Legal Matters" and "Enforceability of Certain Civil Liabilities" in the
Prospectus constituting a part of such Registration Statement.
Yours very truly,
/s/ Neill Andre de la Porte
- --------------------------------------
SMEETS THESSELING VAN BOKHORST SPIGT
<PAGE>
Exhibit 10.15
FORM OF 1999 SHARE OPTION PLAN
1. Purposes. The purposes of the Statia Terminals Group N.V.
1999 Share Option Plan are:
(a) To further the growth, development and success of the
Company and its Affiliates by enabling the executive and other employees and
directors of, and consultants to, the Company and its Affiliates to acquire a
continuing equity interest in the Company, thereby increasing their personal
interests in such growth, development and success and motivating such employees,
directors and consultants to exert their best efforts on behalf of the Company
and its Affiliates; and
(b) To maintain the ability of the Company and its Affiliates
to attract and retain employees, directors and consultants of outstanding
ability by offering them an opportunity to acquire a continuing equity interest
in the Company and its Affiliates which will reflect the growth, development and
success of the Company and its Affiliates.
Toward these objectives, the Committee may grant Options to such employees,
directors and consultants, all pursuant to the terms and conditions of the Plan.
2. Definitions. As used in the Plan, the following capitalized
terms shall have the meanings set forth below:
(a) "Affiliate" - other than the Company, (i) any corporation
or limited liability company in an unbroken chain of corporations or limited
liability companies ending with the Company if each corporation or limited
liability company owns stock or membership interests (as applicable) possessing
more than fifty percent (50%) of the total combined voting power of all classes
of stock in one of the other corporations or limited liability companies in such
chain; (ii) any corporation, trade or business (including, without limitation, a
partnership or limited liability company) which is more than fifty percent (50%)
controlled (whether by ownership of stock, assets or an equivalent ownership
interest or voting interest) by the Company or one of its Affiliates; or (iii)
any other entity, approved by the Committee as an Affiliate under the Plan, in
which the Company or any of its Affiliates has a material equity interest.
(b) "Agreement" - a written share option award agreement
evidencing an Option.
(c) "Board" - the Board of Directors of the Company.
(d) "Code" - the Internal Revenue Code of 1986, as it may be
amended from time to time, including regulations and rules thereunder and
successor provisions and regulations and rules thereto.
(e) "Committee" - the Compensation Committee of the Board, or
such other Board committee as may be designated by the Board to administer the
Plan.
<PAGE>
Exhibit 10.15
Page 2
(f) "Company" - Statia Terminals Group N.V., a Netherlands
Antilles corporation, or any successor entity.
(g) "Exchange Act" - the Securities Exchange Act of 1934, as
it may be amended from time to time, including regulations and rules thereunder
and successor provisions and regulations and rules thereto.
(h) "Fair Market Value" of a Share as of a given date shall
be: (i) the mean of the highest and lowest reported sale prices for a Share, on
the principal exchange on which the Shares are then listed or admitted to
trading, for such date, or, if no such prices are reported for such date, the
most recent day for which such prices are available shall be used; (ii) if the
Shares are not then listed or admitted to trading on a stock exchange, the mean
of the closing representative bid and asked prices for the Shares on such date
as reported by Nasdaq National Market (or any successor or similar quotation
system regularly reporting the market value of the Shares in the
over-the-counter market), or, if no such prices are reported for such date, the
most recent day for which such prices are available shall be used; or (iii) in
the event each of the methods provided for in clauses (i) and (ii) above shall
not be practicable, the fair market value determined by such other reasonable
valuation method as the Committee shall, in its discretion, select and apply in
good faith as of the given date; provided, however, that for purposes of
paragraphs (a) and (h) of Section 6, such fair market value shall be determined
subject to Section 422(c)(7) of the Code.
(i) "ISO" or "Incentive Stock Option" - an option to purchase
Shares granted to an Optionee under the Plan in accordance with the terms and
conditions set forth in Section 6 and which conforms to the applicable
provisions of Section 422 of the Code.
(j) "Notice" - written notice actually received by the Company
at its administrative offices on the day of such receipt, if received on or
before 1:30 p.m., on a day when the Company's executive offices are open for
business, or, if received after such time, such notice shall be deemed received
on the next such day, which notice may be delivered in person to the Company's
Chief Financial Officer or sent by facsimile to the Company, or sent by
certified or registered mail or overnight courier, prepaid, addressed to the
Company in care of Statia Terminals, Inc., 800 Fairway Drive, Suite 295,
Deerfield Beach, Florida 33441, Attention:
Chief Financial Officer.
(k) "Option" - a right to purchase Shares granted to an
Optionee under the Plan in accordance with the terms and conditions set forth in
Section 6. Options may be either ISOs or Share options other than ISOs.
(l) "Optionee"- an individual who is eligible, pursuant to
Section 5, and who has been selected, pursuant to Section 3(c), to participate
in the Plan, and who has been granted an Option under the Plan in accordance
with the terms and conditions set forth in Section 6.
(m) "Plan" - this Statia Terminals Group N.V. 1999 Share
Option Plan.
(n) "Securities Act" - the Securities Act of 1933, as it may
be amended from
<PAGE>
Exhibit 10.15
Page 3
time to time, including regulations and rules thereunder and successor
provisions and regulations and rules thereto.
(o) "Share" - a class A common share ($0.01 par value) of the
Company.
(p) "Subsidiary" - any present or future corporation which is
or would be a "subsidiary corporation" of the Company as the term is defined in
Section 424(f) of the Code.
3. Administration of the Plan. (a) The Committee shall have
exclusive authority to operate, manage and administer the Plan in accordance
with its terms and conditions. Notwithstanding the foregoing, in its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights, duties and responsibilities of the Committee under the Plan, including,
but not limited to, establishing procedures to be followed by the Committee,
except with respect to matters which under any applicable law, regulation or
rule, are required to be determined in the sole discretion of the Committee. If
and to the extent that no Committee exists which has the authority to administer
the Plan, the functions of the Committee shall be exercised by the Board.
(b) The Committee shall be appointed from time to
time by the Board, and the Committee shall consist of not less than two (2)
members of the Board. Appointment of Committee members shall be effective upon
their acceptance of such appointment. Committee members may be removed by the
Board at any time either with or without cause, and such members may resign at
any time by delivering notice thereof to the Board. Any vacancy on the
Committee, whether due to action of the Board or any other reason, shall be
filled by the Board.
(c) The Committee shall have full authority to grant,
pursuant to the terms of the Plan, Options to those individuals who are eligible
to receive Options under the Plan. In particular, the Committee shall have
discretionary authority to, in accordance with the terms of the Plan: determine
eligibility for participation in the Plan; select, from time to time, from among
those eligible, the employees, directors and consultants to whom Options shall
be granted under the Plan, which selection may be based upon information
furnished to the Committee by the Company's or an Affiliate's management;
determine whether an Option shall take the form of an ISO or Option other than
an ISO; determine the number of Shares to be included in any Option and the
periods for which Options will be outstanding; establish and administer any
terms, conditions, performance goals, performance targets, restrictions,
limitations, forfeiture, vesting or exercise schedule, and other provisions of
or relating to any Options; to the extent permitted under the applicable
Agreement, grant waivers of terms, conditions, restrictions and limitations
under the Plan or applicable to any Option, or accelerate the vesting or
exercisability of any Option; amend or adjust the terms and conditions of any
outstanding Option and/or adjust the number and/or class of Shares subject to
any outstanding Option; at any time and from time to time after the granting of
an Option, specify such additional terms, conditions and restrictions with
respect to any such Option as may be deemed necessary or appropriate to ensure
compliance with any and all applicable laws or rules, including, but not limited
to, terms, restrictions and conditions for compliance with applicable securities
laws, regarding an Optionee's exercise of Options by tendering Shares or under
any "cashless exercise" program established by the Committee, and methods of
withholding or providing
<PAGE>
Exhibit 10.15
Page 4
for the payment of required taxes; offer to buy out an Option previously
granted, based on such terms and conditions as the Committee shall establish and
communicate to the Optionee at the time such offer is made; and, to the extent
permitted under the applicable Agreement, permit the transfer of an Option or
the exercise of an Option by one other than the Optionee who received the grant
of such Option (other than any such a transfer or exercise which would cause any
ISO to fail to qualify as an "incentive stock option" under Section 422 of the
Code).
(d) The Committee shall have all authority that may
be necessary or helpful to enable it to discharge its responsibilities with
respect to the Plan. Without limiting the generality of the foregoing sentence
or paragraph (a) of this Section 3, and in addition to the powers otherwise
expressly designated to the Committee in the Plan, the Committee shall have the
exclusive right and discretionary authority to interpret the Plan and the
Agreements; construe any ambiguous provision of the Plan and/or the Agreements
and decide all questions concerning eligibility for and the amount of Options
granted under the Plan. The Committee may establish, amend, waive and/or rescind
rules and regulations and administrative guidelines for carrying out the Plan
and may correct any errors, supply any omissions or reconcile any
inconsistencies in the Plan and/or any Agreement or any other instrument
relating to any Options. The Committee shall have the authority to adopt such
procedures and subplans and grant Options on such terms and conditions as the
Committee determines necessary or appropriate to permit participation in the
Plan by individuals otherwise eligible to so participate who are foreign
nationals or employed outside of the United States, or otherwise to conform to
applicable requirements or practices of jurisdictions outside of the United
States; and take any and all such other actions it deems necessary or advisable
for the proper operation and/or administration of the Plan. The Committee shall
have full discretionary authority in all matters related to the discharge of its
responsibilities and the exercise of its authority under the Plan. Decisions and
actions by the Committee with respect to the Plan and any Agreement shall be
final, conclusive and binding on all persons having or claiming to have any
right or interest in or under the Plan and/or any Agreement.
(e) Each Option shall be evidenced by an Agreement,
which shall be executed by the Company and the Optionee to whom such Option has
been granted, unless the Agreement provides otherwise; however, two or more
Options to a single Optionee may be combined in a single Agreement. An Agreement
shall not be a precondition to the granting of an Option; however, no person
shall have any rights under any Option unless and until the Optionee to whom the
Option shall have been granted (i) shall have executed and delivered to the
Company an Agreement or other instrument evidencing the Option, unless such
Agreement provides otherwise, and (ii) has otherwise complied with the
applicable terms and conditions of the Option. The Committee shall prescribe the
form of all Agreements, and, subject to the terms and conditions of the Plan,
shall determine the content of all Agreements. Any Agreement may be supplemented
or amended in writing from time to time as approved by the Committee; provided
that the terms and conditions of any such Agreement as supplemented or amended
are not inconsistent with the provisions of the Plan.
(f) A majority of the members of the entire Committee
shall constitute a quorum and the actions of a majority of the members of the
Committee in attendance at a
<PAGE>
Exhibit 10.15
Page 5
meeting at which a quorum is present, or actions by a written instrument signed
by all members of the Committee, shall be the actions of the Committee.
(g) The Committee may consult with counsel who may be
counsel to the Company. The Committee may, with the approval of the Board,
employ such other attorneys or consultants, accountants, appraisers, brokers or
other persons as it deems necessary or appropriate. In accordance with Section
12, the Committee shall not incur any liability for any action taken in good
faith in reliance upon the advice of such counsel or such other persons.
(h) In serving on the Committee, the members thereof
shall be entitled to indemnification as directors of the Company, and to any
limitation of liability and reimbursement as directors with respect to their
services as members of the Committee.
(i) Except to the extent prohibited by applicable law
or the applicable rules of a stock exchange, the Committee may, in its
discretion, allocate all or any portion of its responsibilities and powers under
this Section 3 to any one or more of its members and/or delegate all or any part
of its responsibilities and powers under this Section 3 to any person or persons
selected by it; provided, however, the Committee may not delegate its authority
to correct errors, omissions or inconsistencies in the Plan. Any such authority
delegated or allocated by the Committee under this paragraph (i) of Section 3
shall be exercised in accordance with the terms and conditions of the Plan and
any rules, regulations or administrative guidelines that may from time to time
be established by the Committee, and any such allocation or delegation may be
revoked by the Committee at any time.
4. Shares Subject to the Plan. (a) Options granted under the
Plan shall cover Shares. Such Shares subject to the Plan may be either
authorized and unissued Shares (which will not be subject to preemptive rights)
or previously issued Shares acquired by the Company or any Subsidiary. The total
number of Shares that may be delivered pursuant to Options granted under the
Plan is 1,140,000 Shares.
(b) Notwithstanding any of the foregoing limitations
set forth in this Section 4, the numbers of Shares specified in this Section 4
shall be adjusted as provided in Section 10.
(c) Any Shares subject to an Option which for any
reason expires or is terminated without having been fully exercised may again be
granted pursuant to an Option under the Plan, subject to the limitations of this
Section 4.
(d) Any Shares delivered under the Plan in assumption
or substitution of outstanding stock options, or obligations to grant future
stock options, under plans or arrangements of an entity other than the Company
or an Affiliate in connection with the Company or an Affiliate acquiring such
another entity, or an interest in such an entity, or a transaction otherwise
described in Section 6(j), shall not reduce the maximum number of Shares
available for delivery under the Plan.
5. Eligibility. Executive and other employees, including
officers, of the
<PAGE>
Exhibit 10.15
Page 6
Company and the Affiliates, directors (whether or not also employees) of the
Company or any Affiliate, and consultants to the Company and the Affiliates,
shall be eligible to become Optionees and receive Options in accordance with the
terms and conditions of the Plan, subject to the limitations on the granting of
ISOs set forth in Section 6(h).
6. Terms and Conditions of Options. All Options granted under
the Plan shall be either ISOs or Options other than ISOs. To the extent that any
Option does not qualify as an Incentive Stock Option (whether because of its
provisions or the time or manner of its exercise or otherwise), such Option, or
the portion thereof which does not so qualify, shall constitute a separate
Option other than an Incentive Stock Option. Each Option shall be subject to all
the applicable provisions of the Plan, including the following terms and
conditions, and to such other terms and conditions not inconsistent therewith as
the Committee shall determine and which are set forth in the applicable
Agreement. Options need not be uniform as to all grants and recipients thereof.
The number of Shares covered by an Option shall be stated in the applicable
Agreement.
(a) The option exercise price per Share subject to each
Option shall be determined by the Committee and stated in the
Agreement; provided, however, that, subject to paragraphs (h)(C)
and/or (j) of this Section 6, if applicable, such price applicable to
any ISO shall not be less than one hundred percent (100%) of the Fair
Market Value of a Share at the time that the Option is granted.
(b) Each Option shall be exercisable in whole or in such
installments, at such times and under such conditions, subject to
Section 14, as may be determined by the Committee in its discretion and
stated in the Agreement, and, in any event, over a period of time
ending not later than ten (10) years from the date such Option was
granted, subject to paragraph (h)(C) of this Section 6.
(c) An Option shall not be exercisable with respect to a
fractional Share or the lesser of fifty (50) Shares or the full number
of Shares then subject to the Option. No fractional Shares shall be
issued upon the exercise of an Option.
(d) Each Option may be exercised by giving Notice to the
Company specifying the number of Shares to be purchased, which shall be
accompanied by payment in full including applicable taxes, if any, in
accordance with Section 9. Payment shall be in any manner permitted by
applicable law and prescribed by the Committee, in its discretion, and
set forth in the Agreement, including, in the Committee's discretion,
and subject to such terms, conditions and limitations as the Committee
may prescribe, payment in accordance with a "cashless exercise" program
established by the Committee and/or in Shares owned by the Optionee or
by the Optionee and his or her spouse jointly.
(e) No Optionee or other person shall become the beneficial
owner of any Shares subject to an Option, nor have any rights to
dividends or other rights of a shareholder with respect to any Shares
until he or she has exercised his or her Option in accordance with the
provisions of the Plan and the applicable Agreement.
<PAGE>
Exhibit 10.15
Page 7
(f) An Option may be exercised only if at all times during the
period beginning with the date of the granting of the Option and ending
on the date of such exercise, the Optionee was an employee, director or
consultant of the Company or an Affiliate. Notwithstanding the
preceding sentence, the Committee may determine in its discretion that
an Option may be exercised prior to expiration of such Option following
termination of such continuous employment, directorship or consultancy,
whether or not exercisable at such time, to the extent provided in the
applicable Agreement.
(g) Subject to the terms and conditions and within the
limitations of the Plan, the Committee may modify, extend or renew
outstanding Options granted under the Plan, or accept the surrender of
outstanding Options (up to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefor (to the
extent not theretofore exercised).
(h) (A) Each Agreement relating to an Option shall state
whether such Option will or will not be treated as an ISO. No ISO shall
be granted unless such Option, when granted, qualifies as an "incentive
stock option" under Section 422 of the Code. No ISO shall be granted to
any individual otherwise eligible to participate in the Plan who is not
an employee of the Company or a Subsidiary on the date of granting of
such Option. Any ISO granted under the Plan shall contain such terms
and conditions, consistent with the Plan, as the Committee may
determine to be necessary to qualify such Option as an "incentive stock
option" under Section 422 of the Code. Any ISO granted under the Plan
may be modified by the Committee to disqualify such Option from
treatment as an "incentive stock option" under Section 422 of the Code.
(B) Notwithstanding any intent to grant ISOs, an
Option granted under the Plan will not be considered an ISO to the
extent that it, together with any other "incentive stock options"
(within the meaning of Section 422 of the Code, but without regard to
subsection (d) of such Section) under the Plan and any other "incentive
stock option" plans of the Company, any Subsidiary and any "parent
corporation" of the Company within the meaning of Section 424(f) of the
Code, are exercisable for the first time by any Optionee during any
calendar year with respect to Shares having an aggregate Fair Market
Value in excess of $100,000 (or such other limit as may be required by
the Code) as of the time the Option with respect to such Shares is
granted. The rule set forth in the preceding sentence shall be applied
by taking Options into account in the order in which they were granted.
(C) No ISO shall be granted to an individual
otherwise eligible to participate in the Plan who owns (within the
meaning of Section 424(d) of the Code), at the time the Option is
granted, more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or a Subsidiary or any "parent
corporation" of the Company within the meaning of Section 424(f) of the
Code. This restriction does not apply if at the time such ISO is
granted the Option exercise price per Share subject to the Option is at
least 110% of the Fair Market Value of a Share on the date such ISO is
granted, and the ISO by its terms is not exercisable after the
expiration of five (5) years
<PAGE>
Exhibit 10.15
Page 8
from such date of grant.
(i) An Option and any Shares received upon the exercise of an
Option shall be subject to such other transfer and/or ownership
restrictions and/or legending requirements as the Committee may
establish in its discretion and which are specified in the Agreement
and may be referred to on the certificates evidencing such Shares. The
Committee may require an Optionee to give prompt Notice to the Company
concerning any disposition of Shares received upon the exercise of an
ISO within: (i) two (2) years from the date of granting such ISO to
such Optionee or (ii) one (1) year from the transfer of such Shares to
such Optionee or (iii) such other period as the Committee may from time
to time determine. The Committee may direct that an Optionee with
respect to an ISO undertake in the applicable Agreement to give such
Notice described in the preceding sentence, at such time and containing
such information as the Committee may prescribe, and/or that the
certificates evidencing Shares acquired by exercise of an ISO refer to
such requirement to give such Notice.
(j) In the event that a transaction described in Section
424(a) of the Code involving the Company or a Subsidiary is
consummated, such as the acquisition of property or stock from an
unrelated corporation, individuals who become eligible to participate
in the Plan in connection with such transaction, as determined by the
Committee, may be granted Options in substitution for stock options
granted by another corporation that is a party to such transaction. If
such substitute Options are granted, the Committee, in its discretion
and consistent with Section 424(a) of the Code, if applicable, and the
terms of the Plan, though notwithstanding paragraph (a) of this Section
6, shall determine the option exercise price and other terms and
conditions of such substitute Options.
7. Transfer, Leave of Absence. For purposes of the Plan, a
transfer of an employee from the Company to an Affiliate (or, for purposes of
any ISO granted under the Plan, a Subsidiary), or vice versa, or from one
Affiliate to another (or in the case of an ISO, from one Subsidiary to another),
and a leave of absence, duly authorized in writing by the Company or an
Affiliate, shall not be deemed a termination of employment of the employee for
purposes of the Plan or with respect to any Option.
8. Rights of Employees and Other Persons. (a) No person shall
have any rights or claims under the Plan except in accordance with the
provisions of the Plan and the applicable Agreement.
(b) Nothing contained in the Plan or in any Agreement
shall be deemed to (i) give any employee or director the right to be retained in
the service of the Company or any Affiliate nor restrict in any way the right of
the Company or any Affiliate to terminate any employee's employment or any
director's directorship at any time with or without cause, or (ii) confer on any
consultant any right of continued relationship with the Company or any
Affiliate, or alter any relationship between them, including the right of the
Company or an Affiliate to terminate its relationship with such consultant.
<PAGE>
Exhibit 10.15
Page 9
(c) The adoption of the Plan shall not be deemed to
give any employee of the Company or any Affiliate or any other person any right
to be selected to participate in the Plan or to be granted an Option.
(d) Nothing contained in the Plan or in any Agreement
shall be deemed to give any employee the right to receive any bonus, whether
payable in cash or in Shares, or in any combination thereof, from the Company or
any Affiliate, nor be construed as limiting in any way the right of the Company
or any Affiliate to determine, in its sole discretion, whether or not it shall
pay any employee bonuses, and, if so paid, the amount thereof and the manner of
such payment.
9. Tax Withholding Obligations. (a) The Company and/or any
Affiliate are authorized to take whatever actions are necessary and proper to
satisfy all obligations of Optionees (including, for purposes of this Section 9,
any other person entitled to exercise an Option pursuant to the Plan or an
Agreement) for the payment of all Federal, state, local and foreign taxes in
connection with any Options (including, but not limited to, actions pursuant to
the following paragraph (b) of this Section 9).
(b) Each Optionee shall (and in no event shall Shares
be delivered to such Optionee with respect to an Option until), no later than
the date as of which the value of the Option first becomes includible in the
gross income of the Optionee for income tax purposes, pay to the Company in
cash, or make arrangements satisfactory to the Company, as determined in the
Committee's discretion, regarding payment to the Company of, any taxes of any
kind required by law to be withheld with respect to the Shares subject to such
Option, and the Company and any Affiliate shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to such Optionee. Notwithstanding the above, the Committee may, in its
discretion and pursuant to procedures approved by the Committee, permit the
Optionee to (i) elect withholding by the Company of Shares otherwise deliverable
to such Optionee pursuant to such Option (provided, however, that the amount of
any Shares so withheld shall not exceed the minimum required Federal, state,
local and foreign withholding obligations) and/or (ii) tender to the Company
Shares owned by such Optionee (or by such Optionee and his or her spouse
jointly) and acquired more than six (6) months prior to such tender in full or
partial satisfaction of such tax obligations, based, in each case, on the Fair
Market Value of the Shares on the payment date as determined by the Committee.
10. Changes in Capital. (a) The existence of the Plan and the
Options granted hereunder shall not affect in any way the right or power of the
Board or the shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company or an
Affiliate, any issue of debt, preferred or prior preference shares ahead of or
affecting Shares, the authorization or issuance of additional Shares, the
dissolution or liquidation of the Company or its Affiliates, any sale or
transfer of all or part of its assets or business or any other corporate act or
proceeding.
(b)(i) Upon changes in the outstanding Shares by
reason of a stock dividend, stock split, reverse stock split, subdivision,
recapitalization, reclassification, merger,
<PAGE>
Exhibit 10.15
Page 10
consolidation (whether or not the Company is a surviving corporation),
combination or exchange of Shares, separation, or reorganization, or in the
event of an extraordinary dividend, "spin-off," liquidation, other substantial
distribution of assets of the Company or acquisition of property or stock or
other change in capital of the Company, or the issuance by the Company of shares
of its capital stock without receipt of full consideration therefor, or rights
or securities exercisable, convertible or exchangeable for shares of such
capital stock, or any similar change affecting the Company's capital structure,
the aggregate number, class and kind of shares available under the Plan as to
which Options may be granted and the number, class and kind of shares under each
outstanding Option, the exercise price per share applicable to any such Options
shall be appropriately adjusted by the Committee in its discretion to preserve
the benefits or potential benefits intended to be made available under the Plan
or with respect to any outstanding Options or otherwise necessary to reflect any
such change.
(ii) Fractional Shares resulting from any
adjustment in Options pursuant to this subsection 10(b) shall be aggregated
until, and eliminated at, the time of exercise of the affected Options. Notice
of any adjustment shall be given by the Committee to each Optionee whose Option
has been adjusted and such adjustment (whether or not such Notice is given)
shall be effective and binding for all purposes of the Plan.
(c) In the event of a "Change in Control" (as defined
by the Committee in an Optionee's Agreement or in any employment agreement
between the Optionee and the Company or any Affiliate):
(1) In its discretion and on such terms and
conditions as it deems appropriate, the Committee may provide, either
by the terms of the Agreement applicable to any Option or by a
resolution adopted prior to the occurrence of the Change in Control,
that any outstanding Option shall be accelerated and become immediately
exercisable as to all or a portion of the Shares covered thereby,
notwithstanding anything to the contrary in the Plan or the Agreement.
(2) In its discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either
by the terms of the Agreement applicable to any Option or by resolution
adopted prior to the occurrence of the Change in Control, that any
outstanding Option shall be adjusted by substituting for Shares subject
to such Option stock or other securities of the surviving corporation
or any successor corporation to the Company, or a parent or subsidiary
thereof, or that may be issuable by another corporation that is a party
to the transaction resulting in the Change in Control, whether or not
such stock or other securities are publicly traded, in which event the
aggregate exercise price (as applicable) shall remain the same and the
amount of shares or other securities subject to the Option shall be the
amount of shares or other securities which could have been purchased on
the closing date or expiration date of such transaction with the
proceeds which would have been received by the Optionee if the Option
had been exercised in full (or with respect to a portion of such
Option, as determined by the Committee, in its discretion) prior to
such transaction or expiration date and the Optionee exchanged all of
such shares in the transaction.
<PAGE>
Exhibit 10.15
Page 11
(3) In its discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either
by the terms of the Agreement applicable to any Option or by resolution
adopted prior to the occurrence of the Change in Control, that any
outstanding Option shall, in each case, be converted into a right to
receive cash following the closing date or expiration date of the
transaction resulting in the Change in Control in an amount equal to
the highest value of the consideration to be received in connection
with such transaction for one Share, or, if higher, the highest Fair
Market Value of a Share during the thirty (30) consecutive business
days immediately prior to the closing date or expiration date of such
transaction, less the per share exercise price of such Option,
multiplied by the number of Shares subject to such Option, or a portion
thereof.
(4) The Committee may, in its discretion, provide
that an Option cannot be exercised after such a Change in Control, to
the extent that such Option is or becomes fully exercisable on or
before such Change in Control or is subject to any acceleration,
adjustment or conversion in accordance with the foregoing paragraphs
(1), (2) or (3) of this subsection 10(c).
No Optionee shall have any right to prevent the consummation of any of the
foregoing acts affecting the number of Shares available to such Optionee. Any
actions or determinations of the Committee under this Subsection 10(c) need not
be uniform as to all outstanding Options, nor treat all Optionees identically.
Notwithstanding the foregoing adjustments, in no event may any Option be
exercised after ten (10) years from the date it was originally granted, and any
changes to ISOs pursuant to this Section 10 shall, unless the Committee
determines otherwise, only be effective to the extent such adjustments or
changes do not cause a "modification" (within the meaning of Section 424(h)(3)
of the Code) of such ISOs or adversely affect the tax status of such ISOs.
11. Miscellaneous Provisions. (a) The Plan shall be unfunded.
The Company shall not be required to establish any special or separate fund or
to make any other segregation of assets to assure the issuance of Shares or the
payment of cash upon exercise or payment of any Option. Proceeds from the sale
of Shares pursuant to Options granted under the Plan shall constitute general
funds of the Company. The expenses of the Plan shall be borne by the Company.
(b) Except as otherwise provided in this paragraph
(b) of Section 11 or by the Committee, an Option by its terms shall be personal
and may not be sold, transferred, pledged, assigned, encumbered or otherwise
alienated or hypothecated otherwise than by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of an Optionee only by
him or her. At the Committee's discretion, an Agreement may permit the exercise
of an Optionee's Option (or any portion thereof) after his or her death by the
beneficiary most recently named by such Optionee in a written designation
thereof filed with the Company, or, in lieu of any such surviving beneficiary,
as designated by the Optionee by will or by the laws of descent and
distribution. In the event any Option is exercised by the executors,
administrators, heirs or distributees of the estate of a deceased Optionee, or
such an Optionee's beneficiary, or the transferee of an Option, in any such case
pursuant to the terms and conditions
<PAGE>
Exhibit 10.15
Page 12
of the Plan and the applicable Agreement and in accordance with such terms and
conditions as may be specified from time to time by the Committee, the Company
shall be under no obligation to issue Shares thereunder unless and until the
Committee is satisfied that the person or persons exercising such Option is the
duly appointed legal representative of the deceased Optionee's estate or the
proper legatees or distributees thereof or the named beneficiary of such
Optionee, or the valid transferee of such Option, as applicable.
(c)(i) If at any time the Committee shall determine,
in its discretion, that the listing, registration and/or qualification of Shares
upon any securities exchange or under any state or Federal law, or the consent
or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the sale or purchase of Shares hereunder,
no Option may be exercised in whole or in part unless and until such listing,
registration, qualification, consent and/or approval shall have been effected or
obtained, or otherwise provided for, free of any conditions not acceptable to
the Committee.
(ii) If at any time counsel to the Company
shall be of the opinion that any sale or delivery of Shares pursuant to an
Option is or may be in the circumstances unlawful or result in the imposition of
excise taxes on the Company under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make such sale
or delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act, or otherwise with
respect to Shares or Options, and the right to exercise any Option shall be
suspended until, in the opinion of such counsel, such sale or delivery shall be
lawful or will not result in the imposition of excise taxes on the Company.
(iii) Upon termination of any period of
suspension under this subsection 11(c), any Option affected by such suspension
which shall not then have expired or terminated shall be reinstated as to all
shares available before such suspension and as to the shares which would
otherwise have become available during the period of such suspension, but no
suspension shall extend the term of any Option.
(d) The Committee may require each person receiving
Shares in connection with any Option under the Plan to represent and agree with
the Company in writing that such person is acquiring the Shares for investment
without a view to the distribution thereof. The Committee, in its absolute
discretion, may impose such restrictions on the ownership and transferability of
the Shares purchasable or otherwise receivable by any person under any Option as
it deems appropriate. Any such restrictions shall be set forth in the applicable
Agreement, and the certificates evidencing such shares may include any legend
that the Committee deems appropriate to reflect any such restrictions.
(e) The Committee may, in its discretion, extend one
or more loans to Optionees who are key employees or directors of the Company or
an Affiliate in connection with the exercise or receipt of an Option granted to
any such individuals. The terms and conditions of any such loan shall be
established by the Committee.
(f) In the discretion of the Committee, an Optionee
may elect irrevocably (at a time and in a manner determined by the Committee)
prior to exercising an
<PAGE>
Exhibit 10.15
Page 13
Option that delivery of Shares upon such exercise shall be deferred until a
future date and/or the occurrence of a future event or events, specified in such
election. Upon the exercise of any such Option and until the delivery of any
deferred shares, the number of Shares otherwise issuable to the Optionee shall
be credited to a memorandum account in the records of the Company and any
dividends or other distributions payable on such Shares shall be deemed
reinvested in additional Shares, in a manner determined by the Committee, until
all Shares credited to such Optionee's memorandum account shall become issuable
pursuant to the Optionee's election.
(g) By accepting any benefit under the Plan, each
Optionee and each person claiming under or through such Optionee shall be
conclusively deemed to have indicated their acceptance and ratification of, and
consent to, all of the terms and conditions of the Plan and any action taken
under the Plan by the Committee, the Company or the Board, in any case in
accordance with the terms and conditions of the Plan.
(h) Neither the adoption of the Plan nor anything
contained herein shall affect any other compensation or incentive plans or
arrangements of the Company or any Affiliate, or prevent or limit the right of
the Company or any Affiliate to establish any other forms of incentives or
compensation for their employees, directors or consultants, or grant or assume
options or other rights otherwise than under the Plan.
(i) The Plan shall be governed by and construed in
accordance with the laws of the State of New York, without regard to such
state's choice of law provisions, except as superseded by applicable United
States Federal law or the laws of the Netherlands Antilles.
(j) The words "Section," "subsection" and "paragraph"
herein shall refer to provisions of the Plan, unless expressly indicated
otherwise. Wherever any words are used in the Plan or any Agreement in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
(k) The Company shall bear all costs and expenses
incurred in administering the Plan, including expenses of issuing Shares
pursuant to any Options granted hereunder.
12. Limits of Liability. (a) Any liability of the Company or
an Affiliate to any Optionee with respect to any Option shall be based solely
upon contractual obligations created by the Plan and the Agreement.
(b) None of the Company, any Affiliate, any member of
the Committee or the Board, or any other person participating in any
determination of any question under the Plan, or in the interpretation,
administration or application of the Plan, shall have any liability, in the
absence of bad faith, to any party for any action taken or not taken in
connection with the Plan, except as may expressly be provided by statute.
13. Amendments and Termination. The Board may, at any time and
with or
<PAGE>
Exhibit 10.15
Page 14
without prior notice, amend, alter, suspend, or terminate the Plan,
retroactively or otherwise; provided, however, unless otherwise required by law
or specifically provided herein, no such amendment, alteration, suspension, or
termination shall be made which would impair the previously accrued rights of
any holder of an Option theretofore granted without his or her written consent,
or which, without first obtaining approval of the shareholders of the Company
(where such approval is necessary to satisfy (i) with regard to ISOs, any
requirements under the Code relating to ISOs or (ii) any applicable law,
regulation or rule), would:
(a) except as is provided in Section 10, increase the
maximum number of Shares which may be sold or awarded
under the Plan;
(b) except as is provided in Section 10, decrease the
minimum option exercise price requirements of Section
6(a);
(c) change the class of persons eligible to receive
Options under the Plan; or
(d) extend the duration of the Plan or the period during
which Options may be exercised under Section 6(b).
The Committee may amend the terms of any Option theretofore
granted, including any Agreement, retroactively or prospectively, but no such
amendment shall impair the previously accrued rights of any Optionee without his
or her written consent.
14. Duration. Following the adoption of the Plan by the Board,
the Plan shall become effective as of the date on which it is approved by the
holders of a majority of the Company's outstanding Shares which are present and
voted at a meeting, or by written consent in lieu of a meeting, which approval
must occur within the period ending twelve (12) months after the date the Plan
is adopted by the Board. The Plan shall terminate upon the earliest to occur of:
(a) the effective date of a resolution adopted by the
Board terminating the Plan;
(b) the date all Shares subject to the Plan are delivered
pursuant to the Plan's provisions; or
(c) ten (10) years from the date the Plan is approved by
the Company's shareholders.
No Option may be granted under the Plan after the earliest to occur of the
events or dates described in the foregoing paragraphs (a) through (c) of this
Section 14; however, Options theretofore granted may extend beyond such date.
No such termination of the Plan shall affect the previously
accrued rights of any Optionee hereunder and all Options previously granted
hereunder shall continue in force and in operation after the termination of the
Plan, except as they may be otherwise terminated in accordance with the terms of
the Plan or the Agreement.
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement, originally made as of the 27th day of
November, 1996 between Statia Terminals Group N. V., a Netherlands Antilles
corporation, having a registered office at L.B. Smithplein 3, Curacao,
Netherlands Antilles (the "Company"); Statia Terminals, Inc., a Delaware
corporation, with offices at 800 Fairway Drive, Suite 295, Deerfield Beach,
Florida 33441 (the "Subsidiary"); and ____________, an individual with an
address of ______________ (the "Employee"), is hereby amended and restated,
effective _______ __, 1999.
R E C I T A L S
WHEREAS, the Company has entered into a certain Amended and
Restated Stock Purchase and Sale Agreement dated as of November 4, 1996, among
the Company and certain other corporations (the "Purchase and Sale Agreement")
pursuant to which the Company shall, directly or indirectly, acquire all of
the issued and outstanding shares of the common stock of the Subsidiary;
WHEREAS, the Employee has been and is presently in the
employ of the Subsidiary and is presently serving as _____________ of the
Subsidiary;
WHEREAS, the Employee possesses an intimate knowledge of the
business and affairs of the Subsidiary and its policies, procedures, methods
and personnel;
WHEREAS, the Company desires to secure the continued
services and employment of the Employee on behalf of the Subsidiary, and the
Employee desires to be employed by the Subsidiary, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the parties hereto, each intending to be legally
bound hereby, agree as follows:
1. Employment. The Company hereby agrees to cause the
Subsidiary to employ and continue to employ the Employee as _____________ of
the Subsidiary and the Subsidiary hereby agrees to employ and continue to
employ the Employee as ____________, and the Employee accepts such employment
for the term of the employment specified in Section 3 hereof (the "Employment
Term"). During the Employment Term, the Employee shall serve as the
____________ of the Subsidiary, performing such duties and having such
authority as shall be reasonably required of an executive-level employee of
the Subsidiary, reporting only to the Subsidiary's President and Chief
Executive Officer and the Board of Directors of the Subsidiary (the "Board"),
and shall have such other powers and perform such other additional executive
duties as may from time to time be assigned to him by such President and Chief
Executive Officer or the Board. Such duties being performed and such authority
being exercised shall be at least commensurate with the duties being performed
and authority being exercised by the Employee immediately prior to the date of
this Agreement.
<PAGE>
2. Performance. The Employee will serve the Subsidiary
faithfully and to the best of his ability and will devote substantially all of
his time, energy, experience and talents during regular business hours and as
otherwise reasonably necessary to such employment, to the exclusion of all
other business activities; provided however, that such exclusion shall not
prohibit the Employee from attending to the Employee's personal matters and/or
financial and investment affairs (which financial or investment affairs shall
not conflict with the business of the Subsidiary or the Company and is subject
to the provisions of Section 12 hereof) during regular business hours as may
from time to time be reasonably necessary so long as attendance to such
matters and affairs does not interfere with the performance of the Employee's
duties hereunder.
3. Employment Term. Subject to earlier termination pursuant
to Section 7 hereof the Employment Term shall begin on March 31, 1999, and
continue until March 31, 2002; provided, however, that beginning on March 31,
2000, and on each anniversary of such date, the Employment Term shall
automatically renew for an additional one year beyond the end of the then
current term, unless, at least 90 days before March 31, 2000, or March 31 of
any succeeding year, either party gives notice to the other of his or its
desire to terminate this Agreement, in which case the Employment Term shall
terminate as of March 31, 2002, or the end of the then-current three-year
term, as applicable.
4. Compensation.
(a) Salary. During the Employment Term, the Company
shall cause the Subsidiary to pay the Employee a base salary, payable in equal
bi-weekly installments, subject to withholding and other applicable taxes, at
an annual amount of not less than ___________ U.S. Dollars ($_______). Such
base salary shall be reviewed by the Board in January, 2000, and at least
annually thereafter, and shall be increased annually, effective January 1 of
the applicable year, but may not be reduced, from the amount in effect for the
immediately preceding year, at an annual rate not less than the annual rate of
increase in the Consumer Price Index as measured by the United States
Department of Labor, Bureau of Labor Statistics (the "BLS"), All Items,
Consumer Price Index for All Urban Consumers (the "CPI-U"), and any such
increased base salary shall be the Employee's "base salary" for purposes of
this Agreement. In determining the rate of such annual increase, the base
shall be the CPI-U for the first day of the calendar year preceding the year
for which the base salary increase is being calculated and such base shall be
compared with the CPI-U as of the last day of such year. If the CPI-U is no
longer published in substantially its current form by the BLS, then a
successor index shall be substituted by mutual agreement of the Company and
the Employee.
(b) Cash Incentive Bonus. For the calendar year 1999 and
for each subsequent calendar year, or portion thereof, during the Employment
Term, a reasonable target EBITDA (as defined below) for each calendar year and
a target bonus for the Employee for such calendar year shall be submitted to
the Board by the chief executive officer, or the highest ranking officer then
in service, of the Subsidiary (the "CEO") and agreed to by the Board and the
CEO, and as soon as practicable after the end of each such calendar year as
the actual EBITDA achieved for such calendar year has been determined, the
Company shall cause the Subsidiary to pay to the Employee a lump-sum bonus
determined as described in this Section 4(b). No portion
-2-
<PAGE>
of such bonus will be paid if less than 85% of the target EBITDA is achieved
in the applicable calendar year. Payment of 85% of the target bonus would be
made if 85% of the target EBITDA is achieved, and if the actual EBITDA for the
applicable calendar year exceeds 85% of the target EBITDA for such year, the
percentage of the target bonus paid shall be the percentage of the target
EBITDA so achieved in such year. For example, if 92% of the target EBITDA is
achieved in a calendar year, 92% of the target bonus would be paid for such
year, or if 160% of the target EBITDA is achieved in a calendar year, 160% of
the target bonus would be paid for such year. If during the course of any
calendar year, the Company shall sell or otherwise dispose of five percent
(5%) or more of the total assets of the Company and its subsidiaries, the CEO
and the Board shall establish a revised EBITDA target for such calendar year
after receiving management's recommendation.
"EBITDA" shall mean for any period, the (a) net income (or
net loss) of the Company and its subsidiaries plus (b) the sum of (i) interest
expense, (ii) income tax expense, (iii) depreciation expense, (iv)
amortization expense, (v) extraordinary or unusual losses deducted in
calculating net income (or net loss), and (vi) other non-cash charges less (c)
extraordinary or unusual gains and other non-cash income items added in
calculating net income (or net loss), in each case determined in accordance
with generally accepted accounting principles at the end of each such calendar
year for the Company and its subsidiaries on a consolidated basis, and plus
(d) any fees paid to or expenses incurred by the Company pursuant to any
management or similar agreement between the Company and any stockholder
holding 50 percent or more of the capital stock of the Company or an Affiliate
thereof.
(c) Employee Benefits. The Employee shall be entitled to
and shall receive employee benefits or participate in plans and programs
maintained by or on behalf of the Subsidiary which are otherwise made
available to employees of the Subsidiary, including but not limited to,
medical, health, accident and disability plan, cafeteria plan and 401(k) plan.
(d) Additional Benefits. In addition to the other
compensation payable to the Employee hereunder, during the Employment Term,
the Company shall cause the Subsidiary to furnish at its expense an
automobile, or a reasonable allowance in lieu thereof at the option of the
Subsidiary, office, reasonable secretarial services, professional association
dues, and such other supplies, equipment, facilities, services and emoluments
appropriate to such Employee's position.
(e) Paid Time Off. Employee shall be entitled to paid
vacation, holidays, and sick leave during each calendar year of employment in
accordance with policies of the Subsidiary. Vacation may only be taken at
times mutually convenient for the Subsidiary and the Employee. The Subsidiary
may elect to pay out all accrued and unused vacation time as of December 31 of
any calendar year in January of the following calendar year. Such pay out will
be at the then prevailing rate of annual compensation. No more than four weeks
vacation time may be accrued at any time.
5. Expenses. The Employee shall be entitled to be reimbursed
by the Subsidiary for all reasonable expenses incurred by him in connection
with the performance of his
-3-
<PAGE>
duties hereunder in accordance with policies established by the Board from time
to time and upon receipt of appropriate documentation.
6. Secret Processes and Confidential Information. For the
Employment Term and thereafter (a) the Employee will not divulge, transmit or
otherwise disclose (except as legally compelled by court order, and then only
to the extent required, after prompt notice to both the Company and the
Subsidiary of any such order), directly or indirectly, other than in the
regular and proper course of business of the Company and/or the Subsidiary,
any confidential knowledge or information with respect to the operations or
finances of the Subsidiary or the Company or any of their subsidiaries or
Affiliates, or with respect to confidential or secret processes, services,
techniques, customers or plans with respect to the Company and/or the
Subsidiary, and (b) the Employee will not use, directly or indirectly, any
confidential information for the benefit of anyone other than the Company
and/or the Subsidiary; provided, however, that the Employee has no obligation,
express or implied, to refrain from using or disclosing to others any such
knowledge or information which is or hereafter shall become available to the
public other than through disclosure by the Employee.
To the greatest extent possible, any Work Product (as
hereinafter defined) shall be deemed to be "work made for hire" (as defined in
the Copyright Act, 17 U.S.C.A. Section 101 et seq., as amended) and owned
exclusively by the Subsidiary. The Employee hereby unconditionally and
irrevocably transfers and assigns to the Subsidiary all right, title and
interest the Employee may currently have or in the future may have by
operation of law or otherwise in or to any Work Product, including, without
limitation, all patents, copyrights, trademarks, service marks and other
intellectual property rights. The Employee agrees to execute and deliver to
the Subsidiary any transfers, assignments, documents or other instruments
which the Company may deem necessary or appropriate to vest complete title and
ownership of any Work Product, and all rights therein, exclusively in the
Subsidiary.
During the term of this Agreement and thereafter, Employee
shall not take any action to disparage or criticize to any third parties any
of the services of the Company and/or the Subsidiary or to commit any other
action that injures or hinders the business relationships of the Company
and/or the Subsidiary.
All files, records, documents, memorandums, notes or other
documents relating to the business of Company and/or the Subsidiary, whether
prepared by Employee or otherwise coming into his possession in the course of
the performance of his services under this Agreement, shall be the exclusive
property of Company and shall be delivered to Company and not retained by
Employee upon termination of this Agreement for any reason whatsoever.
7. Termination.
(a) Mutual Agreement. The employment of the Employee
hereunder may be terminated at any time by the mutual agreement of the parties
hereto.
-4-
<PAGE>
(b) Termination for Substantial Cause. The Subsidiary
may at any time upon thirty (30) days prior written notice to the Employee,
terminate the employment of the Employee for Substantial Cause (as hereinafter
defined).
(c) Termination by the Employee. The Employee shall be
entitled to terminate his employment without being in violation of any
provision of this Agreement upon 30 days prior written notice to the
Subsidiary (i) for Good Reason; (ii) upon "normal retirement" under any
then-effective plan or policy of the Subsidiary, or, in the absence of any
such plan or policy, under the terms of the CBI Pension Plan, as amended
effective August 1, 1996, as if the Employee participated in such plan
(whether or not he actually so participated); or (iii) at any time and for any
reason after the Employee has attained the age of sixty (60) years.
(d) Termination by Death or Disability. The employment of
the Employee shall terminate upon the death of the Employee or the inability
of the Employee to perform his duties as a result of physical or mental
disability for an aggregate of 90 days in any 180 day period, as determined in
good faith by the Board ("Disability").
8. Definitions. For purposes of this Agreement:
(a) "Business" shall mean the business of owning, leasing
or operating petroleum and other bulk liquid blending, trans-shipment, storage
or processing facilities or providing related terminaling services such as
supply of bunker fuel for vessels, emergency and spill response services;
brokering of product trades and vessel representation.
(b) "Substantial Cause" shall mean:
(i) Conviction of the Employee of a crime
constituting a felony in the jurisdiction in which
committed, or for any other criminal act against the
Subsidiary or the Company involving dishonesty or willful
misconduct intended to injure the Subsidiary or the Company
or any Affiliate of either of them in any substantial way
(whether or not a felony and whether or not criminal
proceedings are initiated);
(ii) Failure or refusal of the Employee in any material
respect to perform his obligations under this Agreement or
the duties of his employment or to follow the lawful and
proper directives of the Board, other than by reason of a
Disability provided such duties or directives are consistent
with this Agreement, and such failure or refusal continues
uncured for a period of thirty (30) days after written
notice thereof from the Subsidiary to the Employee which
specifies (i) the nature of such failure or refusal, and
(ii) the reasonable action of the Employee necessary for
cure; or
(iii) Any willful or intentional misconduct of the
Employee (A) in violation of any written policy of the
Subsidiary providing for termination of employment in the
event of violation of such policy or (B) committed for the
purpose, or having the reasonably foreseeable effect, of
injuring in a substantial
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<PAGE>
way the Company, the Subsidiary, or any Affiliate of either
of them, or their respective businesses or reputations,
including, without limitation, causing the Subsidiary or any
of its Affiliates to violate a state or federal law relating
to the workplace environment.
(c) "Good Reason" shall mean:
(i) a significant reduction in the authorities,
duties, or responsibilities of Employee;
(ii) assignment to an office location which is
more than 100 miles from the office location of the Employee
as of the date of this Agreement;
(iii) material breach of this Agreement by
the Subsidiary or the Company which is not cured within
thirty (30) days after written notice of such breach is
given by the Employee to the Company and the Subsidiary; or
(iv) any failure of any successor to all or
substantially all of the assets or business of the Company
or the Subsidiary, by purchase, merger, consolidation or
otherwise, to fully assume the obligations of the Company or
the Subsidiary, as applicable, under this Agreement.
As applied to the Employee, the parties hereto agree that any position other
than _________ of the Subsidiary or any superior position with the Subsidiary
would constitute a significant reduction in the authorities, duties or
responsibilities of the Employee.
(d) "Change in Control" shall mean the occurrence of
the following: Castle Harlan Partners II L.P. and its Affiliates and their
partners ("CHP") cease to own or control at least fifty percent (50%) of the
aggregate number of the Company's outstanding class A common shares and class
B subordinated shares owned or controlled, directly or indirectly, by such
Persons as of the effective date of the amendment and restatement of this
Agreement; provided, however, that, the foregoing to the contrary
notwithstanding, in no event shall any Change in Control be deemed to occur,
for purposes of this Agreement, as the direct or indirect result of (i) the
occurrence of any of the transactions contemplated under the Purchase and Sale
Agreement, (ii) a public distribution of any such Company shares owned by CHP
(including any distribution of such shares to the partners of Castle Harlan
Partners II L.P.), or (iii) a sale or other distribution to any Competing
Entity, in one or more transactions, by CHP of not more than seven percent
(7%) of the aggregate number of the Company's outstanding class A common
shares and class B subordinated shares (provided, however, that a sale or
distribution of more than seven percent (7%) of such shares to a Competing
Entity will be deemed to be a Change in Control).
(e) "Affiliate" shall mean, with respect to any
Person, any entity that directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control with such
Person.
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<PAGE>
(f) "Person" shall mean any corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or other entity or organization.
(g) "Work Product" shall mean work product,
property, data documentation or information of any kind relating to the
Business, prepared, conceived, discovered, developed or created by the
Employee for the Subsidiary or any of the Subsidiary's Affiliates, clients or
customers while the Employee is employed by the Subsidiary.
(h) "Disability" shall have the meaning specified
in Section 7(d) hereof.
9. Insurance and Indemnification.
(a) Life Insurance. The Subsidiary may purchase insurance
on the life of the Employee, and if it does so, the Employee shall cooperate
fully by performing all the requirements of the life insurer which are
necessary conditions precedent to the issuance of the life insurance policy
issued by it.
(b) Directors and Officers Insurance and Indemnification.
The Subsidiary shall provide directors and officers insurance covering the
Employee for events occurring during the Employment Term on terms at least as
favorable as coverage for Directors of the Company, and the Subsidiary shall
provide indemnification to the Employee to the full extent allowed by the law
of its jurisdiction of incorporation.
10. Severance
(a) If the Employee's employment is terminated by the
Subsidiary without Substantial Cause (including, without limitation, upon
termination of this Agreement following notice thereof by the Company or the
Subsidiary pursuant to Section 3 hereof) or by the Employee for Good Reason,
then, without further liability of the Subsidiary or the Company, except for
their obligations pursuant to this Section 10(a) and such rights and benefits
of participation of or in respect of the Employee under employee benefits
plans, programs and arrangements of the Company, the Subsidiary and their
Affiliates, in accordance with the terms and provisions of such plans,
programs and arrangements, the Employee shall be entitled to (i) medical and
dental benefits as provided immediately prior to the date of termination which
shall continue for the Severance Period (as hereinafter defined) (which shall
be terminated sooner to the extent provided by another employer) and (ii)
severance compensation for the Severance Period following any such
termination, payable in equal monthly installments, subject to withholding and
other applicable taxes, at an annual rate equal to the Employee's base salary
for the year of termination. In addition, the Employee will be entitled to a
pro rata portion of the bonus compensation referred to in Section 4(b) hereof
for the year of termination only as and when ordinarily determined for such
year. For the purposes of this Agreement, "Severance Period" shall mean a
period commencing on the date of any such termination and ending on the
expiration of the Employment Term (determined as of the date of such
termination without
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<PAGE>
giving effect to such termination); provided, however, that the Severance
Period shall not be less than one year.
(b) If the Employee's employment is terminated for
any other reason, then without further liability of the Subsidiary or the
Company, the Employee shall be entitled to the salary, expenses and benefits
accrued to the termination date; provided, however, the Employee shall be
entitled to the bonus referred to in Section 4(b) hereof only in the case of
termination by the Employee of his employment pursuant to Section 7(c) hereof.
11. Notice. Any notices required or permitted hereunder shall
be in writing, signed and shall be deemed to have been given when personally
delivered or when mailed, certified or registered mail, postage prepaid, to
the following addresses:
If to the Employee:
[___________________]
[___________________]
[___________________]
If to the Subsidiary:
Statia Terminals, Inc.
800 Fairway Drive
Suite 295
Deerfield Beach, Florida 33441
Attention: Board of Directors
With a copy to:
Castle Harlan Partners II, L.P.
150 East 58th Street
37th Floor
New York, New York 10015
Attention: David B. Pittaway
and a copy to:
Schulte Roth & Zabel LLP
900 3rd Avenue
New York, New York 10022
Attention: Andre Weiss, Esq.
If to the Company:
Statia Terminals Group N. V.
-8-
<PAGE>
c/o Statia Terminals Inc.
800 Fairway Drive
Suite 295
Deerfield Beach, Florida 33441
Attention: Board of Directors
With a copy to:
Castle Harlan Partners II, L.P.
150 East 58th Street
37th Floor
New York, New York 10015
Attention: David B. Pittaway
and a copy to:
Schulte Roth & Zabel LLP
900 3rd Avenue
New York, New York 10022
Attention: Andre Weiss, Esq.
Each of the Employee, the Subsidiary and the Company may
change its address as for purposes of this Section by sending notice to the
other parties.
12. Non-Competition. The Employee shall not, at any time
during the Employment Term and for a period of twelve months thereafter,
directly or indirectly, except where specifically contemplated by the terms of
his employment or this Agreement, (a) be employed by, engage in or participate
in the ownership, management, operation or control of, or act in any advisory
or other capacity for, any Competing Entity which conducts its business within
the Territory (as the terms Competing Entity and Territory are hereinafter
defined); provided, however, that notwithstanding the foregoing, the Employee
may make solely passive investments in any Competing Entity the common stock
of which is publicly held and of which the Employee shall not own or control,
directly or indirectly, in the aggregate securities which constitute 5% or
more of the voting rights or equity ownership of such Competing Entity; or (b)
solicit or divert any business or any customer from the Subsidiary or any
Affiliate of the Subsidiary or assist any person, firm or corporation in doing
so or attempting to do so; or (c) cause or seek to cause any person, firm or
corporation to refrain from dealing or doing business with the Subsidiary or
any Affiliate of the Subsidiary or assist any person, firm or corporation in
doing so. Notwithstanding any other provision of this Agreement to the
contrary, if the Employee's employment hereunder terminates under any
circumstances and there occurs a Change in Control (whether before or after
such termination of employment), the Employee shall thereupon automatically
cease to be bound by any covenants set forth in this Section 12.
For purposes of this Section 12, (i) the term "Competing
Entity" shall mean any Person which presently or hereafter during the term
hereof is materially engaged in the Business; and (ii) the term "Territory"
shall mean the Caribbean and the area within a three hundred mile
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<PAGE>
radius of (a) the terminal facility operated by an Affiliate of the Subsidiary
at Point Tupper, Nova Scotia, and (b) any terminal hereafter operated by the
Subsidiary or any Affiliate of the Subsidiary.
13. General.
(a) Governing Law; Captions. The terms of this Agreement
shall be governed by and construed under the laws of the State of Florida.
Paragraph and Section captions used herein are for convenience of reference
only, and shall not in any way affect the meaning or interpretation of this
Agreement.
(b) Assignability. The Employee may not assign his
interest in or delegate his duties under this Agreement. Notwithstanding
anything else in this Agreement to the contrary, the Subsidiary may assign
this Agreement and all rights and obligations of the Subsidiary hereunder
shall inure to the benefit of and bind the assignee or any person, firm or
corporation succeeding to all or substantially all of the business or assets
of the Subsidiary by purchase, merger or consolidation.
(c) Dispute Resolution. With the exception of the
Company's or the Subsidiary's right to elect to seek injunctive relief
pursuant to paragraph (g) of this Section 13, in the event of any dispute
between either the Company or the Subsidiary and the Employee arising out of
or relating to this Agreement or its termination or any other aspect of
Employee's employment, the parties hereby agree to submit such dispute to a
non-binding mediation under the American Arbitration Association's National
Rules for the Resolution of Employment Disputes; Arbitration and Mediation
Rules (the "Rules") within sixty (60) days of notice from any one of the
parties to another. Unless the parties can agree on a mediator within thirty
(30) days of such notice, mediation shall proceed pursuant to the Rules. In
the event any such dispute is not resolved by mediation, any party hereto may
initiate an action or claim to enforce any provision or term of this
Agreement. Each party shall bear its or his own costs and expenses (including
attorney's fees) associated with any mediation, action, or claim.
(d) Binding Effect. This Agreement is for the employment
of Employee, personally, and the services to be rendered by him must be
rendered by him and no other person. This Agreement shall be binding upon and
inure to the benefit of the Company, the Subsidiary, and the Employee and, as
the case may be, their respective successors and assigns, personal
representatives, heirs and legatees.
(e) Entire Agreement; Modification. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and may not be modified or amended in any way except in
writing by the parties.
(f) Duration. Notwithstanding the Employment Term
hereunder, this Agreement shall continue for so long as any obligations remain
under this Agreement, including without limitation any obligations of the
Company or the Subsidiary under Sections 9(b), 10 or 13 of this Agreement.
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<PAGE>
(g) Survival. The covenants set forth in Sections 6 and 12
of this Agreement shall survive and shall continue to be binding upon Employee
notwithstanding the termination of this Agreement for any reason whatsoever.
The covenants set forth in Section 6 and Section 12 of this Agreement shall be
deemed and construed as separate agreements independent of any other provision
of this Agreement. The existence of any claim or cause of action by Employee
against Company and/or Subsidiary, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Company or
Subsidiary of any or all covenants. It is expressly agreed that the remedy at
law for the breach of any such covenant is inadequate and that injunctive
relief shall be available to prevent the breach or any threatened breach
thereof.
(h) Severability. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby and the parties shall in good faith agree on a
modification of the invalid, illegal or unenforceable provision which renders
it valid, legal or enforceable (as the case may be) and which as closely as
possible reflects the original intent of the parties.
(i) Guaranty of Company. The Company hereby
unconditionally guarantees to Employee the full and timely performance by
Subsidiary of its obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound, have hereunto executed this Agreement the day and year first
written above.
Statia Terminals, Inc.
By:
------------------------------------------
Name:
Title:
Statia Terminals Group N.V.
By:
------------------------------------------
Name:
Title:
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<PAGE>
EMPLOYEE
---------------------------------------
[____________]
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<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
As independent certified public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
West Palm Beach, Florida,
April 20, 1999.
<PAGE>
Exhibit 23.2
[Letterhead of White & Case LLP]
April ___, 1999
Securities and Exchange Commission
450 Fifth Avenue N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Statia Terminals Group N.V.
We hereby consent to the references to this firm on the cover page and
under the headings "Legal Matters" and "Taxation - U.S. Federal Income Taxation"
in the Prospectus forming part of the Registration Statement of Statia Terminals
Group N.V. on Form S-1.
In giving this consent, we do not hereby admit that we are "experts"
under the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission thereunder for purposes of any part of
the Registration Statement (as it may be further amended from time to time),
including this exhibit.
Yours very truly,
/s/ White & Case LLP
-----------------------------
<PAGE>
Exhibit 23.4
[Letterhead of PricewaterhouseCoopers]
CONSENT OF INDEPENDENT TAX ADVISORS
We consent to the reference to our firm under the headings "Experts" and
"Taxation-Netherlands Antilles Taxation" in the Registration Statement of Statia
Terminals Group N.V. on Form S-1 and related prospectus pertaining to the offer
and issue of Common Shares.
PRICEWATERHOUSECOOPERS
Tax Lawyers and Tax Consultants
/s/ Steve R. Vanenburg
-----------------------------------
Steve R. Vanenburg J.L.M.
Partner
Netherlands Antilles
April 19, 1999
<PAGE>
Exhibit 23.8
[Letterhead of Stewart McKelvey Stirling Scales]
April 19, 1999
Securities and Exchange Commission
450 Fifth Avenue N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Statia Terminals Group N.V.
We hereby consent to references to this firm under the captions "Risk
Factors - Risks Inherent in the Common Shares - You may not be able to sue us
effectively in the Netherlands Antilles or Canada" and "Enforceability of
Certain Civil Liabilities" on the Prospectus forming part of the Registration
Statement of Statia Terminals Group N.V. on Form S-1.
In giving this consent, we do not hereby admit that we are "experts"
under the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission thereunder for purposes of any part of
the Registration Statement (as it may be further amended from time to time),
including this exhibit.
Yours truly,
/s/ Stewart McKelvey Stirling Scales
------------------------------------
Stewart McKelvey Stirling Scales
